Elliott Wave InternationalmyEWISocioniomics.Net
Home > Asian Markets

China's Colossal Real Estate Boom is "Unprecedented in Human History"
Ghost cities are sprawled across the landscape

By Bob Stokes
Wed, 06 Mar 2013 09:15:00 ET
Add to Facebook Add to Twitter Email to a friend Printer Friendly

In case you missed the March 3 broadcast of the CBS news magazine 60 Minutes, it devoted two segments to real estate in urban China. 

One segment featured the rise of a female Chinese billionaire, the world's fifth-wealthiest, self-made woman -- she made it big in real estate.
 
The other segment included scenes that were downright jaw-dropping.
 
Imagine mile after mile of new condominiums and apartment buildings, pristine streets and parking lots. But the images are eerie because something is missing: people.
 
You see, even though the residences are empty, they do belong to an owner. It's just that each condo and apartment unit was purchased as an investment.
 
Property values have doubled, tripled and more. So people in the middle class have sunk every last penny into buying five, even 10 apartments, fueling a building bonanza unprecedented in human history. No nation has ever built so much, so fast.
 
CBS, 60 Minutes, March 3
 
A financial analyst noted that an estimated 20-30% of China's economy is linked to real estate. He also said that China is "building somewhere between 12 and 24 new cities every single year."
 
That's right. Not just new subdivisions or shopping districts, but new cities -- populated by empty high-rise office buildings. The Chinese government has spent some $2 trillion to construct these cities "as a way of keeping the economy growing." To borrow a phrase from a movie: "build it and they will come." But 60 Minutes also noted, "No one's coming." Some projects have remained unoccupied for three to five years. Others have long stood unfinished.
 
Even China's most prominent housing developer says the world's second-largest economy has a real estate bubble, and that it will be a "disaster" if it bursts. Who will be affected? The financial analyst said, "People who have invested three generations worth of savings into properties will see their savings evaporate."
 
Financial bubbles can last longer than observers expect. But when they eventually burst, well, you know what happened in the United States and Europe.
 
Find out what EWI's Asian-Pacific Financial Forecast Service sees ahead for China.
 
The February issue of The Asian-Pacific Financial Forecast devotes an entire section to China, which includes a chart that compares the Shenzhen Real Estate Index with the Shanghai Composite.
 
 

 

 

 

 



FFSThe Asian-Pacific Financial Forecast is the world's most forward-thinking investment letter for Asian-Pacific markets.

Each monthly 10-page issue gives you timely, big-picture analysis and forecasts for stock indexes in Japan, China, India, Australia, Singapore, Hong Kong, and more.

Preview the Latest Asian-Pacific Financial Forecast Now>>
Free Report


Insights into the China Economy and Japan Economy

Elliott Wave International's top Asian market analyst weaves together historical, cultural and economic insights along with Elliott wave analysis to give you a holistic long-term perspective on the China economy and Japan economy.
Download your free East Asian Travel Logs now.

Asian Markets


© 2014 Elliott Wave International

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.