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About 45 minutes
outside of Beijing are the deserted ruins of what was supposed to be the
world's largest amusement park. Instead, farmers have reclaimed the land
planting corn and digging wells next to spires modeled after Disneyland.
Please consider China’s deserted fake
Disneyland
Along
the road to one of China’s most famous tourist landmarks – the
Great Wall of China – sits what could potentially have been another
such tourist destination, but now stands as an example of modern-day China
and the problems facing it.
Situated on an area of around 100 acres, and 45 minutes
drive from the center of Beijing, are the ruins of
‘Wonderland’. Construction stopped more than a decade ago, with
developers promoting it as ‘the largest amusement park in Asia’.
Funds were withdrawn due to disagreements over property prices with the local
government and farmers. So what is left are the
skeletal remains of a palace, a castle, and the steel beams of what could
have been an indoor playground in the middle of a corn field.
Pulling off the expressway and into the car park, I expected to be stopped by
the usual confrontational security guards. But there was absolutely no one to
be seen. I walked through one of the few entrances not boarded up, and
instantly started coughing. In front of me were large empty rooms and
discarded furniture, all covered in a thick layer of dust, along with an
eerie silence that gave the place a haunted feeling – an emotion not
normally associated with a children’s playground.
All these structures of rusting steel and decaying cement,
are another sad example of property development in China involving wasted
money, wasted resources and the uprooting of farmers and their families. It
is a reflection of the country’s property market which many analysts say
the government must keep tightening steps in place. The worry is a massive
increase in inflation and a speculative bubble that might burst, considering
that property sales contribute to around 10 percent of China’s growth.
More pictures and
text in an excellent article by David Gray.
China has the dubious honor of the world's largest vacant malls, vacant
cities, and vacant amusement parks.
Amazingly people insist there is not a property bubble in China. I have news,
there is a bubble and it has now popped.
'Long-term Pain' For Chinese Property Market
Credit Suisse says 'Long-term Pain' For Chinese
Property Market
China’s
overheated real-estate market has become a source of fascination and dread
for investors. With a significant share of the economy tied up in
construction, and global commodity prices hanging on Chinese demand, the
recent drop in property prices could prove a turning point. China Vanke, the largest developer and a bellwether for the
industry, said Monday that sales in November fell down 36%, year-on-year.
This marks the company’s fourth consecutive month of double-digit drops
in revenues. So how much further might house prices fall, and what would be
the impact on developers’ balance sheets? Is it time to push the panic
button? In a new report, Credit Suisse predicts an average drop of 20% from a
peak in mid-2011 to the end of 2012.
If a 20% fall sounds dire, consider that some Chinese media outlets have
begun speculating on the possibility of a much more severe correction to what
is widely seen as a bubble. Some reports flout the idea of 40-50% slump,
which would have huge implications for China’s political economy.
20% does not sound
"dire", it sounds like a cakewalk. Heck, not even 40% is dire. 70%
is dire. 40% is right here right now in Shanghai.
Shanghai Prices Down 40% from Peak, Inventory Clogs Market
The LA Times reports China's housing bubble is
losing air
Home
prices and sales plunge after China's government intentionally slams on the
brakes. Some recent buyers stage demonstrations, destroy real estate offices
and demand refunds of up to 40%.
Home prices nationwide declined in November for the third straight month,
according to an index of values in 100 major cities compiled by the China
Index Academy, an independent real estate firm. Average prices in the
Shanghai area are down about 40% from their peak in mid-2009, to about
$176,000 for a 1,000-square-foot home.
Sales have plummeted. In Beijing, nearly two years' worth of inventory is
clogging the market, and more than 1,000 real estate agencies have closed
this year. Developers who once pre-sold housing projects within hours are
growing desperate. A real estate company in the eastern city of Wenzhou is
offering to throw in a new BMW with a home purchase.
The swift turnaround has stunned buyers such as Shanghai resident Mark Li,
who thought prices had nowhere to go but up. The software engineer closed on
a $250,000, three-bedroom apartment in August, only to watch weeks later as
the developer slashed prices 25% on identical units to attract buyers in a
slowing market.
Outraged, Li and hundreds of others who paid full price trashed the sales
office, scuffled with employees and protested for three days before police
broke up the demonstration. Walking away now would mean losing the $75,000
down payment that he borrowed from his working-class parents.
"I still haven't told them," Li, 29, said of his home's plummeting
value. "It will just make them worry, and it's already too late."
Crash in Progress, Pollyannas
Proven Wrong
China's property bubble is clearly in free-fall. Just as happened in the
United States, developers are offering "free" cars, BMW's no less,
for those willing to take the plunge.
The numerous Pollyannas who said this would not
happen have been proven wrong. China did not "decouple" and home
prices cannot stay elevated over wages and rental prices forever.
Implications for US Dollar
I have said on numerous occasions, China's shift from a real estate and
construction economy is going to send many commodity prices tumbling. In
isolation, this is good for the US dollar, but things cannot be viewed in
isolation.
Currency movements will depend on how central banks in the US, China, Europe,
and Japan react to the global slowdown.
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