[Marxism] Empty Homes and Protests: China’s Property Market Strains the World
lnp3 at panix.com
Mon Dec 31 15:46:46 MST 2018
(It appears that the popping of China's real estate bubble will have
consequences much graver than the 2009 meltdown.)
NY Times, Dec. 31, 2018
Empty Homes and Protests: China’s Property Market Strains the World
By Alexandra Stevenson and Cao Li
JURONG, China — For Hu Peiliang, Jurong was a city of cranes, concrete
and opportunity. He was so sure it was on the cusp of a boom that last
year he moved his family there.
On an overcast day last month, Mr. Hu, a 31-year-old real estate agent,
pointed to one new building after another as evidence. New city blocks
have been built, crosswalks and streetlights erected overnight. One
development straddling several blocks called Yudong International will
include 120 buildings when completed.
But who will buy all those apartments? Mr. Hu paused before answering.
“I was wondering that myself,” he said. Since July, he has sold only a
Unwanted apartments are weighing on China’s economy — and, by extension,
dragging down growth around the world. Property sales are dropping.
Apartments are going unsold. Developers who bet big on continued good
times are now staggering under billions of dollars of debt.
“The prospects of the property market are grim,” said Xiang Songzuo, a
senior economist at Renmin University, said during a lecture at Renmin
Business School this month.
“The property market is the biggest gray rhino,” he said, referring to a
term the government has used to describe visibly big problems in the
Chinese economy that are disregarded until they start gaining momentum.
China is grappling with an economic slowdown brought on by efforts to
curb debt and worsened by the trade fight with the United States. But
any solution will have to contend with the country’s property problems.
More than one in five apartments in Chinese cities — roughly 65 million
— sit unoccupied, estimates Gan Li, a professor at Southwestern
University of Finance and Economics in Chengdu.
“We are already in a difficult economic situation,” Mr. Gan said. “The
decline will only get worse.”
In places like Jurong, homeowners are paying the price. Some property
developers have slashed prices on new apartments to gin up business or
cut corners to save money. That undercuts the property values of earlier
buyers, who increasingly are taking to the streets to protest.
In October, dozens of apartment buyers in Jurong gathered outside the
sales office of Center Park, a 22-building residential complex pitched
by Country Garden, the developer, as China’s version of Central Park in
Manhattan. Security guards barricaded the entrance to prevent protesters
from storming the building to demand their money back.
“I am very angry,” said Jia Rui, 24, who bought a Center Park apartment
a year ago. He watched last year as property prices rose for months
before deciding to buy the apartment, which will be bigger than the one
he currently lives in with his wife and parents. When he learned that
similar apartments were later being sold at nearly half the price, Mr.
Jia said, he felt helpless.
“It is not possible to get a refund,” Mr. Jia said. Then again, he
added, Jurong will have a subway line connecting it to Nanjing, a major
city, by 2023. “Maybe the price will go back up by then,” he said.
China’s property market has long been a wild ride, driven by speculation
from property developers and home buyers alike and made worse by
government efforts to tame prices if they get too high and juice sales
if they get too low. The current slowdown stems in large part from a
three-year building spree driven by a surge in prices in many cities.
Officials struggled to contain a white-hot property market with measures
that included open consideration of a national property tax.
“You never know when the music will stop in China, so you try to do as
much as possible before the music stops,” said Nicole Wong, a property
analyst at CLSA, a stock brokerage. “Which it did.”
Housing is key to China’s well-being. It accounts for roughly one-fifth
to one-third of China’s economic growth, depending on whether ancillary
industries like construction and furniture-making are included. Property
is the largest source of wealth for households, a given in a country
with strict rules against moving money overseas and a volatile stock
market. In major cities, it sometimes accounts for as much as 85 percent
of a family’s assets, according to researchers at Southwestern University.
That store of wealth is looking increasingly shaky. Sales in terms of
gross floor area on the market have dropped sharply since September. The
share of apartments in new developments that are being sold has plunged
since the summer. The number of failed land auctions has doubled this
year, indicating that property developers are unwilling or unable to buy
land for new developments.
Now people are angry, and Chinese officials and property developers are
doing something about it. Officials tried various measures to take steam
out of the market last year and are now reversing some of them.
In recent months, they have loosened mortgage requirements, eased
restrictions on when homeowners can resell their properties and made it
easier for university students to continue living in the cities where
they are studying after they graduate, potentially increasing housing
demand. In some cities, property developers have cut deals with home
buyers to give them back the difference between the current price and
the one they originally paid.
As housing prices begin to fall — in some cities by as much as they did
during the depths of the global financial crisis in 2009 — some buyers
have made their displeasure known. Jurong, a small city by Chinese
standards of 600,000 people about a 45-minute drive from Nanjing, has
experienced at least six protests alone in recent months.
Jurong represents a bet by home buyers that a buoyant market in Nanjing,
a former Chinese capital and one of its more picturesque cities, will
spread to surrounding areas. Many home buyers are retired workers or
farmers who have moved to the city from the surrounding countryside.
Today the city appears to be preparing for a future in which its
population more than doubles. There are 19 other projects like Center Park.
Country Garden, the developer behind Center Park and other residential
complexes around the country, has endured slumping sales and has slashed
prices. It has faced fury from buyers, some of whom have taken to
smashing in the windows of sales offices in at least one city, according
to the local news media, which posted images and video. In a written
statement, Country Garden said fluctuating home prices were “a normal
market phenomenon” and said it would “make proper arrangements” to
assuage angry home buyers.
Hu Peiliang, the real estate agent in Jurong, and his friend Wang Liwei
were selling homes in Nanjing before they decided to make the move to
Jurong. If prices were so high in Nanjing, it seemed only logical to
both men that prospective buyers who were unable to afford a place there
— or who were locked out of the market because of residential
restrictions — would look to Jurong. The government’s plan to build a
metro system made the city even more appealing.
At first they were right. In 2016, some 49,000 apartments were sold in
Jurong, a remarkable number for a city where the annual average is
closer to 4,000, according to Huifeng Li, a research director at the
Purple Mountain Digital New Media Research Institute in Nanjing. The
majority of the new buyers these days are speculators, he said.
Mr. Hu added: “Mostly it’s buyers who are looking for investments who
come here. They see opportunities here.”
Hundreds of buildings sprang up, offering a glimpse of a future bustling
city. Now, these partly constructed buildings have more of a ghost town
At the Center Park development site, green netting drapes over a dozen
half-built apartment buildings, construction cranes on top of each. Men
with white gloves stand at the sales office, from which soft jazz music
is playing, waiting to greet prospective buyers. But there are few
customers, and the greeters mostly look bored.
At the back of the office, a dozen real estate agents sit around coffee
tables and stare at their phones.
After a tour of the show apartments, Mr. Wang said quietly, “I wouldn’t
buy an apartment from them.”
Alexandra Stevenson is a business correspondent based in Hong Kong,
covering Chinese corporate giants, the changing landscape for
multinational companies and China’s growing economic and financial
influence in Asia. @jotted • Facebook
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