//
you're reading...
China Trade Mag (Chinese Trade and Business)

China quantity bubble fears as speculators leave apartments empty


A recent media story, which power companies denied, claimed that almost 65 million power meters in urban China had registered zero consumption over a six month period, which raised a theory that there are enough empty apartments in China to house 200 million people.

However, the true figures will probably never be known, because there is little transparency in such statistical information, which has led to calls for accurate information to be published.

Without this information, policy-makers face an uphill battle, because the actual size of China’s unused apartment stock is crucial to measuring the extent and seriousness of the nation’s property-market bubble.

It is also highly likely that such data would also reveal a quantity bubble as well as a price bubble.

Price bubbles, which generally last a long time, occur primarily because of government regulation, like height limits that almost eradicate the possibility of increasing supply in accordance with demand, such as occurred in Tokyo in the past, and are occurring in London right now.

China also is experiencing an urban price bubble nationwide, but high prices in major cities cannot be rationally explained.

Rising rents can be explained easily, because it can be linked to inflation expectation, with landlords fearing the cost of repairing user wear and tear will be higher in the future.

However, China’s property bubble is exceptional, in that there is an unprecedented amount of living space available, the large number of empty apartments, which equates to the nation’s quantity bubble.

Quantity bubbles are less common than price bubbles, and usually don’t last as long, as rising supply normally forces prices down, but the influx of money in China seems to be keeping the prices higher, even though supply is still rising.

Price bubbles cause economic damage in three ways: a banking crisis; a weakening economy for several years; and adverse effect on other supply industries.

A quantity bubble ends when the building cycle changes, new supply causing prices to crash, as happened in the United States in the late 1980s, and in turn causing a banking crisis.

Quantity bubbles occurred in Southeast Asia during the 1990s, causing a market crash, and finally the Asian Financial Crisis.

In Taiwan’s quantity bubble of the late 1980s, analysts used electricity meter data to establish the number of empty flats, and concluded that 15% were empty, and today, analysts are trying the same tactic in China, compounded by the lack of reliable availability of such data.

The data that is available concludes that China does not have a housing shortage, and it’s per capita living space of one person per 28-30 square meters is higher than in Europe or Japan, and using Japan’s standard, China has enough living space for every man, woman and child in the country.

Of far greater importance, however, are the housing figures showing a huge amount of empty flats being held for speculation, and no other reason.

The total normal vacancy rate in a normal economy is determined by a world standard calculation, and is normally about 3%, compared with an estimated 25-30% vacancy rate in China.

This is speculative inventory; property is being stockpiled just as copper and other commodities are stockpiled in expectation of price rises, and are probably worth about 15% of China’s GDP.

China needs a reasoned property strategy, to avoid the problems that America is experiencing from its property bubbles; failure in America caused a crash that has lasted, and will continue to last, for many years.

About Craig Hill

Teacher and Writer. Writing has been cited in New York Times, BBC, Fox News, Aljazeera, Philippines Star, South China Morning Post, National Interest, news.com.au, Wikipedia and others.

Discussion

2 thoughts on “China quantity bubble fears as speculators leave apartments empty

  1. Les services de rencontres se révèle être un parmi des plus célèbres sites internet
    de rencontre présente en ce moment sur le net. Grâce a plus de 26, 000,000 membres, ce site pour rencontre a une très grande
    présence partout sur la planète. L’objectif premier Un bon site de rencontre se présente d’aider les membres a
    trouver le partenaire de rêve en vue de construire une relation concrète à l’extérieur du Les sites de rencontres. Par contre, la plupart des membres font la visitent ce site en vue leur cercle de copains. Afin de facilité le travail de tous les internautes en ce qui concerne la mise en relation, Un vrai bon site de rencontre suggérée une belle variété de service intéressant dans le but d’élever l’ensemble des chances de créer la rencontre parfaite concevable.

    Posted by http://www.slideshare.net/tinpaper24/une-rencontre-hors-du-commun-sur-un-site-de-rencontre | July 19, 2013, 23:09
  2. I think what you published was actually very logical.
    But, think on this, suppose you wrote a catchier post title?
    I am not saying your information is not solid, however suppose you added
    something that grabbed people’s attention? I mean China
    quantity bubble fears as speculators leave apartments empty | Craig Hill Training Services is a little plain. You
    might look at Yahoo’s front page and see how they create article
    titles to get viewers to click. You might add a related video or
    a picture or two to grab readers interested about what you’ve written. Just
    my opinion, it could make your posts a little bit more interesting.

    Posted by UNLIMITED income | December 15, 2015, 05:25

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

If you liked what you just read, click "Subscribe" to become a follower of the Craig Hill site. You will receive an email each time a new post is published.

Join 14,948 other followers

An archive of all my old posts

Follow me on Twitter

Most Recent Posts Post on My Blog About China: China News

The vanishing allure of doing business in China

The vanishing allure of doing business in China

It is nothing new for foreign firms to endure shakedowns by the Chinese Communist Party. As far back as revolutionary times, Chairman Mao’s victorious troops did not directly confiscate foreign-owned assets as their Bolshevik forerunners had done in Russia. Instead, they wore them down with higher taxes and fines so big that eventually companies gave […]

Wikipedia blames pro-China infiltration for bans

Wikipedia blames pro-China infiltration for bans

Wikipedia has suffered an “infiltration” that sought to advance the aims of China, the US non-profit organisation that owns the volunteer-edited encyclopaedia has said. The Wikimedia Foundation told BBC News the infiltration had threatened the “very foundations of Wikipedia”. The foundation banned seven editors linked to a mainland China group. Wikimedians of Mainland China accused […]

Diaries of former Mao aide spark custody battle over unofficial history of China

Diaries of former Mao aide spark custody battle over unofficial history of China

Today, “Li materials” are the subject of a legal battle between Stanford University and Mr. Li’s widow in Beijing. This is a battle for custody of an unofficial history of China. In millions of handwritten Chinese characters, Mr. Li documents his early days in the party, the revolution that brought him to power and his […]

World’s dirtiest cities list raises issue: Why don’t politicians call out China?

World’s dirtiest cities list raises issue: Why don’t politicians call out China?

Ponder this: A new tally of global cities’ emissions finds that the top 25 are responsible for 52% of the planet’s urban greenhouse gas emissions. Twenty-three of those are in China. New York City is the first American city to appear, at No. 26. Out of the top 75, just four other American cities are listed […]

Cadence Column: Asia, September 13, 2021

Cadence Column: Asia, September 13, 2021

The easiest solution to China’s escalating situation in the South Sea is to enforce China’s own formal statements at face value. China says they respect other countries and do not want to militarize the South Sea. Leave it at that. Any disrespect toward other countries is not at the behest of Xijinping. Any militarization of […]

Why is Iran so keen on joining the Shanghai Cooperation Organisation?

Why is Iran so keen on joining the Shanghai Cooperation Organisation?

What Happened: Iran became an observer in the Shanghai Cooperation Organization – originally comprised of China, Russia, and 4 Central Asian republics – back in 2005. In the 16 years since, Tehran has consistently pushed for an upgrade to full membership, particularly after the SCO underwent its first expansion, adding India and Pakistan, in 2017. […]

How China hijacked the war on terror to commit genocide in Xinjiang

How China hijacked the war on terror to commit genocide in Xinjiang

Two decades after the 9/11 attacks spawned the U.S. government’s self-declared “Global War on Terrorism,” the nation that responded to it with the most aggressive regulatory, policing and social policies is thousands of miles from Ground Zero. China’s ruling Chinese Communist Party exploited the international revulsion toward terrorism sparked by the 9/11 attacks to reframe […]

China extends a fast helping hand to the Taliban

China extends a fast helping hand to the Taliban

China has reassured the Taliban that it is ready to begin development activities in Afghanistan via its ambitious multi-trillion-dollar Belt and Road initiative (BRI), as the war-torn country drifts toward an economic meltdown. In what some see as Beijing’s tacit approval of the Afghan militant group’s interim government, China announced on Wednesday (September 8) US$31 […]

China’s population enters ‘deep aging’ in many major cities

China’s population enters ‘deep aging’ in many major cities

China is facing a population crisis of increasing urgency, with 149 cities shown in recent census figures to have 14 percent of their residents over the age of 65. A recent analysis by the state-run China Business News (CBN) found that 149 cities in China have now entered “deep aging,” the middle state on a […]

China weighing occupation of former U.S. air base at Bagram in Afghanistan

China weighing occupation of former U.S. air base at Bagram in Afghanistan

China is considering deploying military personnel and economic development officials to Bagram airfield, perhaps the single-most prominent symbol of the 20-year U.S. military presence in Afghanistan.  The Chinese military is currently conducting a feasibility study about the effect of sending workers, soldiers and other staff related to its foreign economic investment program known as the […]

%d bloggers like this: