 200 Million Empty Apartments? China's Complex Property MarketFor last several months, China said to have > 200 mn empty apartments. W key element of living space per capita, > Europe or Japan, seems fair to conclude it does NOT have housing shortage:
By: EconomyWatch.com It's been said many times that China is experiencing a nationwide urban property price bubble. Some months ago, the Chinese media floated a story – denied by power companies – that 64.5 million urban electricity meters registered zero consumption over a six-month period. That led to speculation that China has enough empty apartments to house 200 million people. Statistical transparency is lacking in this area, so the truth about empty apartments remains under wraps. But high prices in major cities where most of the country's property value is concentrated are difficult to explain clearly. Rising rents are a little easier to explain, however, even in the face of empty flats everywhere. Some blame intermediaries for ramping up the market, but this explanation is hard to accept, given China's fragmented intermediary real estate industry. Instead, inflation expectation is probably driving current rent increases: Property owners anticipate spending more in the future remodelling flats to compensate for renter wear-and-tear, so they charge higher rents now to plan for higher costs. That said, what remains hard to figure in is how higher rents can stick, given what seems to be an unprecedented amount of living space. This huge stock of empty flats equals not a price - but a quantity - bubble. Quantity bubbles are less common than price bubbles, and they don't last as long. Rising supply usually exerts downward pressure on prices, although an influx of money can hold up prices even when supply is rising. Quantity and price bubbles may grow together. Southeast Asia, for example, experienced a quantity-cum- As regional currencies were pegged to the dollar, loose monetary conditions were imported from the United States, fuelling a property bubble. Due to few restrictions on urban development, rising prices led to massive increases in supply. Liquidity inflow fuelled speculative demand. But when U.S. monetary policy tightened, the market crashed and triggered the Asian Financial Crisis. The latest experience in the U.S. market was mainly based on a price bubble, although some cities such as Las Vegas and Miami saw quantity bubbles as well. When Taiwan experienced a price-cum-quantity bubble in the late 1980s, analysts determined the number of empty flats by obtaining electricity meter data from the power supplier, leading many to conclude that about 15 percent of all flats were empty. Today, some analysts are trying the same tactic in China. But Taiwan's housing conditions are less complex. Getting to the core of China's situation requires ... To read more at http://www.economywatch.com, go to: http://www.economywatch.com/ # # # EconomyWatch.com is the world's largest global, independent, economics community. Every month we serve over 750k users, who read and discuss economics, investing and finance topics. End
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