
Shenzhen's never-ending skyscraper boom - fmihaila
http://edition.cnn.com/2017/07/23/architecture/shenzhen-skyscraper/index.html
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contingencies
Here in Shenzhen, I would argue that it's fairly clear to anyone on the ground
that the boom has ended.

There are currently a host of half-finished huge buildings that are not being
completed. For instance, I can see a bunch from my window. This is most likely
due to lapsed demand and reduced speculative investment in the sector.

This is really just a delayed adjustment along the lines of an established
national change, Shenzhen possibly encountered the slowdown later owing to
increased expectations/hype/financing availability and special economic and
political darling status.

I would say from physical observation that the second half of last year was
the real slow down, things haven't changed much since then.

The local real estate market is pretty expensive... a lot of people who bought
apartments 10 years ago are now USD multi-millionaires, despite having real
incomes as low as 1-2000USD/month. As a consequence of consistent price
growth, purchasing a small apartment now costs about the same as Sydney, with
a median price above USD$1M. It is fairly difficult to rent a halfway decent
apartment under about 6000CNY (~1000USD)/month, many pay double that or more.

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puranjay
Similar situation here in some parts of India. There are dollar millionaires
on paper with family incomes of under $1500/month, all because they bought an
apartment in Delhi 10 years ago.

The problem is, there are no buyers. The apartments are priced at $1M on
paper, but there are no buyers.

I wonder what will happen once the bubble collapses.

A good brand new apartment in a decent part of Gurgaon, India, will set you
back by at least $800+/month

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Buge
Why would anyone value property higher than people are willing to pay?
Wouldn't that just mean more property tax? Usually it's the opposite.

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Matthias247
> Why would anyone value property higher than people are willing to pay?
> Wouldn't that just mean more property tax?

The idea between property tax seems to be different between countries. I
learned that in some countries you pay annual property tax based on the
estimated value of your property - which would be not-beneficial like you
said.

Here in germany you pay an annual property tax which is calculated based on
the land area that you own. E.g. you pay for 200m^2, and the amount of tax per
m^2 is fixed by the city. That means you would pay the same independent of
whether you value or property at 1€ oder 10M€. There's also a real estate
transfer tax which the buyer of a property needs to pay. This is calculated
based on the real price. However it doesn't affect the seller. So valuing your
property higher than it's market value has no tax implications, but of course
it will be a lot harder to really sell it for more than market rate.

~~~
omegaworks
Wouldn't this mean the guy with a condo block on his 200m^2 is being
subsidized by the retiree with a single-family home on her 200m^2? More
infrastructure, schools, wider streets needed for the condo.

Does Germany not fund its schools with property tax?

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germanier
They are not correct. Property tax in Germany is based on some fictious value
(which is not necessarily close to market value) calculated using an old
algorithm. Usuable floor area is an an important input, so a condo block and a
family home are not taxed equally.

There have been serious proposals for reform in the past few years but a tax
based on land area alone was not seriously considered so far by the competent
body as far as I know (but there have been calls for them to do so e.g. by
some mayors).

Nonetheless, property tax ends up in the hands of municipalities, making up
about 15% of their budget on average. Roads and schools are only partially
funded through the municipality's budget, a huge chunk comes from higher
levels. For schools, municipalities pay about one third of the cost (again, on
average). This ensures e.g. that schools are adequately funded even in poor
districts. It also has practical reasons. For example teachers are usually not
employed by the school itself but civil servants of the state delegated to
teach at the school. Thus their salary doesn't end up in the school's budget.

Distribution of tax income and expenses between the different levels of
government is highly political and constantly bargained. For example, just
this year was decided that the federal government gets more administrative
rights regarding highways and digitalization ("data highways") for giving the
states 4B€ more of the sales tax.

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seanmcdirmid
China is currently caught in a trap between speculative demand, demand by
speculators who hope real estate asset prices will keep increasing, and real
demand of actual use for these assets. It is difficult to see what the real
demand for these sky scrapers are, even if they have no problem selling them
off to speculators. Who knows how this will end, hopefully real demand will
catch up but I'm guessing there will be a Japan-scale real estate crash
eventually.

I was fortunate to stay at the hotel at the top of Guangzhou's IFC (the first
and probably last time I get a room that is above the 90th floor). Looking
down on Guangzhou's skyline, at least, it was very beautiful (especially when
a lightning storm rolled in).

~~~
ehnto
My biggest issue with my local housing market is what you might consider a
commercialisation of residential real estate. Property prices don't reflect
their value as places to live and their location, but rather their ability to
be a vehicle for investment income. High rent ensues and yet the lower demand
for those properties as rentals doesn't deter the property prices from rising.
Currently there are a handful of almost completely empty apartment buildings
in the CBD.

People can't afford to rent or buy them yet they still move about the property
market.

At some point they will surely come back into circulation at a price that
makes sense for individuals, that is of course if they aren't all owned
entirely by corporate scale landlords with bigger pockets.

~~~
chii
> yet the lower demand for those properties as rentals doesn't deter the
> property prices from rising.

this is an interesting phenomenon, because it's the same mechanism (imho
anway, as an armchair economist) as gold prices rising during uncertain times.
The actual use of gold is little to none, and yet, as a store of value,
everyone in the society agrees on its stability/valuation, even in times of
gov't hostility.

If you look at property this way, chinese speculators are using the same line
of thinking - where they actually don't want the apartment to be rented out
(and thus, look/feel 'used'). The price reflects not the utility, but as a
store of value.

I think the fundamental reason this is happening is that the chinese do not
trust their own gov't enough to store their assets in a more liquid form. Or,
perhaps there's really no other forms of storage that's not risky. And those
who can't bring their currency assets out of the country then must choose
real-estate.

~~~
ehnto
You can see the utility as a store of value in international investment
properties too. A part of the problem driving prices up in my locale. Chinese
and other international investors seeking to store wealth will purchase
properties here, and they will pay prices that the local market wouldn't. That
drives the prices up, as locals with property want a piece of that
international cash. Meanwhile the property can go underutilized and the
community it is in gains nothing.

~~~
chii
> Meanwhile the property can go underutilized and the community it is in gains
> nothing.

but what doesn't make sense to me is why not build more property to sell?

The money the original owners got for selling must be circulating somewhere,
which means a boost to the local economy, which means they should have money
to invest in new development.

~~~
seanmcdirmid
If property is being used as a speculative asset, building more doesn't make
sense.

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coldcode
A former coworker from China said a lot of real estate (particularly civil
construction) happens when a new mayor or other leader gets appointed. New
construction is a great source of graft - I will order the new construction if
you give me 10% (or whatever the rate is). So things get built over and over
again, or built and abandoned.

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jordache
it may look cool from far away, like a skyline shot, all lit up. However at
micro level, streets in China (especially newly developed) are entirely
indiscernible and total lack of character.

If you watch any of the driving in China videos on youtube, you'll see that
streets are lined with shops and sidewalks that are sterile and look identical
block after block...

There are exceptions of course, city squares, etc, are largely unique from one
another.. but once you get into the urban residential and shopping districts,
they mostly are all identical

~~~
FooBarWidget
That's funny. All my Chinese relatives say the same thing about Europe. Once
you have seen a European city, they are all the same.

In contrast, they think China is diverse.

[https://en.m.wikipedia.org/wiki/Out-
group_homogeneity](https://en.m.wikipedia.org/wiki/Out-group_homogeneity)

~~~
seanmcdirmid
They have a point. As an American, I found Switzerland to be a bit more
diverse than Beijing, having lived in both.

The big problem is Chinese brick and mortar retail is so dysfunctional, and it
will never be fixed since online shopping has easily solved that problem
around it.

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firedev
It would be much nicer if they didn't put photos of Moscow to illustrate
China.

~~~
elefanten
If you read the captions, it's attributed properly.

