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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
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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.





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