Chinese "ghost town" analysis

[Randy W]

from the SCMP. This article is fairly complex and hard to follow, and doesn't really seem to draw any conclusions, but if you'd like to peruse it, here it is

 

Chasing ghosts

Where is China's next wave of empty 'new towns'?

 

 

Unlike ghost towns in the West which are laid waste by wars, natural disasters, disease or failed economies, the ones in China are created out of haphazard and rushed projects by local governments attempting to boost GDP growth and reach urbanisation targets.

 

. . .

 

Housing revenue is a key pillar of China’s economy. The latest data from the national statistics bureau show that nearly 12 per cent of China’s GDP in 2014 came from new home sales, a similar level as the previous year.

This is higher than mature markets like the US, which maintains a ratio of 10 per cent, according to brokerage CLSA’s property research.

 

. . .

 

It found that the average vacancy rate in China for property completed between 2009 and 2014 was 15 per cent – equivalent to 10.2 million empty units – which on the surface is nothing to worry about considering the US vacancy rate stands at 10 per cent.

“The bigger concern is the 17 per cent vacancy rate in remote, low-value properties,” the report said.

. . .

Some researchers, however, are cautious about labelling cities as ghost towns. The CRIC, a think tank that researches China’s property market, said in its 2013 ghost town report that it was unfair and irresponsible to label a city as such if one only looks at the short-term oversupply of housing.

. . .

 

“It is not accurate to call a city ghost city just based on future oversupply. Multiple ownership [one household owning multiple properties] has already caused empty houses in all cities. How much do these empty homes affects the city life? One has to observe and then conclude,” he said.

“Overall, you need to be careful about the search for ghosts. People are too eager to find ghosts and are likely to label any place a ghost city,” he said.

No official Chinese government data has been released on vacancy rates in cities, and experts and scholars have yet to reach consensus on the best scientific formula to calculate this.

 

 

 

The "demolition index" referred to in the article is simply an index of new construction projects already on the books, and expected to complete within the next five years vs. existing, occupied housing. That is, the number of existing units that would need to be abandoned/"demolished" in order to satisfy (balance) the supply and demand for the new housing.

 

For example, for Ordos, the "demolition index" of 54% means that 54% of existing homes would need to be abandoned in order to satisfy the actual available new housing being constructed.

[tsap seui]

What a mess.

 

I had thought they had more sense. The lure of big money in housing markets is a mistress who blows both ways...blow you up, and, blow you down. I've read those reports of folks who invested everything in multi-million dollar homes, then sat on them, renting them out for a coupla thousand a month, or less. Bad math.....vedy vedy bad math.

[Randy W]

An update on Ordos. I went Googling for this after it was mentioned in another one of SerpentZA's videos as a "success story" - GHOST CITY - Inside the Chinese Housing Bubble

 

or

 

from Forbes

 

Apr 19, 2016

An Update On China's Largest Ghost City - What Ordos Kangbashi Is Like Today

During its first five years of construction, Kangbashi was able to build a complete downtown area — replete with a grandiose government buildings, a world-class museum, an opulent opera house, a library designed to look like a row of books on a shelf, as well as a significant amount of commercial housing — and make it look enough like a city for international reporters to call it a ghost town when “construction site” probably would have been more accurate.

“At the beginning almost nobody moved to Kangbashi since there were just places to work and no communal facilities, so people went back and forth between Kangbashi and Dongsheng every workday,” Wang explained. “It needed time to build this new city, and schools and hospitals were completed two or three years later. That’s why the population was very small for those first five years, and this was also the period many media outlets reported Kangbashi as a ghost town.”

“Just as the old saying goes, ‘Rome wasn’t built in a day,’” Xing Su, an Ordos native who is currently studying urban planning at the University of Waterloo in Canada, stated. ”Due to lack of relevant urban infrastructures and services, Kangbashi had a hard time attracting people in its early years.”

. . .

Beyond that, an under-reported aspect of China’s housing market is the fact that developers often participate in speculation as well. It is common for them to release new units onto the market in waves, rather than all at once, and to hold back on selling properties if the prices dip too low. This occurred in the more mature sections of Kangbashi north of the Wulanmulun river after the local property market experienced a crash in 2011. The reason why some apartments remain unsold there isn’t because there are no buyers but because the developers are holding onto them in hopes that restricting supply will up the price in the near future.

In all of these instances, the presence of unoccupied homes is less of a calamity and more the result of complex social, political, and economic forces that’s more or less a normal part of China’s particular method of new city building and vitalization. In point, you can’t just show up in a developing Chinese city, take some pictures of empty buildings, and jump to the conclusion that they are harbingers of an impending economic doomsday.

. . .

The “ghost city” critique often denotes little more than the period between the time when a downtown core of a new city is built and the time when it is actually ready for people to begin coming in.

 

 

[Randy W]

The last part of the Forbes article is interesting in itself, about Urdos' layout as designed

The government building was place at the “head” of the new city, the central plaza was its “body,” and he housing blocks that extended out to the sides were its “wings.” The idea was not only to create a new city for people to live in but to be awed by. The place was made to be a masterpiece, a trophy on the shelf of the officials who built it.

 

. . .

 

The streets are 40 meters wide, intersections are nearly a half a kilometer apart. The city has one of the largest public squares on the planet running down the center of it, which is nearly as large as Beijing’s Tiananmen Square. This physically separates people from the places they work at, shops, entertainment facilities, public amenities, as well as each other.

 

“They had the crazy idea to be as big as Beijing, to look like Beijing, and to have as wide of streets that Beijing has,” Hajjar explained.

 

It takes a little effort to find the people in Ordos Kangbashi. If you merely walk around the central plaza where the most prominent landmarks are located you are liable to encounter very few people. A steady stream of cars will pass by, but that will be about it. Although if you go over to where the middle school or the $16 million, 400 stall food court is located, you will find yourself in a place that appears fully inhabited.

 

. . .

 

The emptiness of Kangbashi itself is a deception. What the new district doesn’t really lack is people — it’s population is growing at an acceptable clip for a new Chinese city of its size — but reasons for people to step out of their homes and interact publicly. Hajjar asserts that even if the new district was full, due to this spread out, gargantuan design the place would still appear relatively deserted.

 

“Another fact is that Kangbashi still looks like a ghost city even now, with 100,000 people here,” Wang concurred. “It is still a quiet town, since there are few places for people to hang out, most of them choose to stay at home after work.”