China

China's "ghost cities" may be a lot less ghostly than previously thought. The phenomenon of eerie shopping malls and completed apartment blocks completely devoid of stirrings of Chinese life has been well-documented in Western media in recent years, from video segments to photo series and more. But according to CLSA analyst Nicole Wong, those reports might be missing the forest for the trees—or in this case, missing the people for their timing. Ms. Wong, who recently returned from a tour of 137 projects in three Chinese cities often cited for their ghostly developments, says that the presence of empty apartments is thanks to some unusual quirks of China's real-estate landscape. Specifically, she noted at Tuesday's CLSA Asia-Pacific Markets Investors' Forum in Hong Kong, new Chinese apartments are typically sold as virtual concrete shells that buyers must outfit, installing everything from showers to flooring to kitchen sinks to make them move-in ready. Accordingly, Ms. Wong notes, many such "ghost" developments take awhile to gain traction—especially as it's often the sale of the land they're sitting on that allows the city to fund subsequent facilities and transportation links that will eventually help make them mature neighborhoods. "When buildings are first completed they are actually not that habitable, so it takes a long time before most people want to move in," Ms. Wong said. In a report on her findings, Ms. Wong notes that buildings completed between 2008-11 in Zhengzhou, Ordos and Wenzhou—often cited as instances of an overly frothy property market—have typically seen tenants move in over a three-year period. Among such buildings, Ms. Wong's survey found an average of 48% take-up in the first 12-18 months, another 19% in the next year, and then yet another 15% in the year after that. Such a delay, she says, can be attributed to the fact that residents need time not only to fully outfit their units, but many also like to wait until their neighbors have done so as well to avoid moving in before the dust clouds and drilling sounds have subsided. In the case of Henan's Zhengzhou—frequently dubbed China's "largest ghost city"—Ms. Wong notes that a number of media portrayals of the city's newer areas have used photographs taken between 2010-12, before the metro system connecting the district to the city's more established neighborhoods was completed. On her most recent visit there in August, Ms. Wong said she saw many cars, "hordes of pedestrians" and considerable ground activity in addition to curtains and air-conditioners installed in numerous residential buildings. "I asked local people about what they think...about Zhengzhou being a ghost city and the answer is, 'What?' They don't actually have any idea they're being labeled a ghost city," Ms. Wong said. According to CLSA surveys, 65% of middle-income Chinese households report owning just one property, her report notes. But many such property owners aspire to upgrade or buy another, and Ms. Wong suggests they have the potential buying power to do just that, noting that 60% of them have no mortgages. Still, while the spectral quality of some "ghost cities" may be fleeting, other white-elephant developments built in cities with smaller populations, such as northeastern Tieling or Inner Mongolia's Ordos, are likely to continue struggling. For example, the deflation of Ordos's coal mining industry has further hurt the city's ability to draw new residents, Ms. Wong notes, spurring vacancy rates as high as 37% in certain neighborhoods, a trend CLSA expects to deepen. Some property developers have suspended work, while others have simply fled. "Ordos people are very realistic," she says of her visit there. "They say it's absolutely a dead city." Economy Worry Ghost City in China Real Estate house price in Bubble Capital madness Property bubble More information on chin real property see the videos at http://youtube.com/user/cosmeticmachines

• published: 29 Nov 2013
• views: 1782