Look, we all want the fairy tale China development story to be real. I certainly do, especially considering the fact that I am paid in RMB. But wanting reality to be something different than it is, is self-delusion. Or in modern parlance: ‘a reality distortion field.’
Exhibit A: Jim Rogers claiming that the Chinese ‘housing bubble is over.’ Is it really?
Earlier this week Bill Bishop translated a story originating from the Public Security Bureau, that there are an estimated 3.8 million unoccupied apartments in Beijing. After a lot of flurry, the PSB added a caveat “saying that their definition of “empty” is not really the same as a real estate developer or economic statistician’s definition of “’empty’.”
If these numbers are even remotely correct, consider this: there are roughly 20 million people in the Beijing Metro area and 10 million households. Thus 3.8 million apartments is enough to hold a third of the population.
The stories you hear from expats and locals alike makes this staggering number believable. For example, on June 1, the mayor of Kunming (the capital of Yunnan province) said: “that it is common for privileged government employees to have four to five apartments. Some government agencies are rich and powerful enough to provide more housing than is needed for their staff.”
Down in Shenzhen, the new Kingkey 100-floor skyscraper – which opened last year – is only 20% leased and those are at discount prices.
Here in Shanghai, after years of high vacancy rates, the World Financial Tower (the tallest building in East Asia) finally hit the 70% occupancy high water mark this past fall.
But why stop at a handful of underoccupied buildings when you can build even bigger monuments of grandeur. Heck, let’s just demolish relatively new stadiums and build grander soon-to-be-artifacts! Or as they say in Chinese, build more mian zi gong chen (face-projects).
Exhibit B: fresh photos from Monday of the new Shanghai Tower, which when completed in 2014 will become the 2nd tallest building in the world.
Thorntonism strikes again! (pdf)