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Jun 10Home, sweet home.
Apparently, buying a house in many Chinese cities is more or less like buying a Vegas condo/McMansion in 2005, except that there are approximately 65 million empty apartments across China, and approximately half are being purchased solely as an investment.
From China, Yglesias notes:
One element in China’s housing bubble is that there’s no property tax in China, so there’s no cost to buying an apartment and then just holding on to it, thus using the house as a store of value. Accord to Patrick Chovanec this “store of value” mode of acquisition—rather than speculative purchases with an eye toward “flipping”—is the main thing driving Chinese to accumulate multiple homes. The country’s innovation-averse bank regulators have created a situation in which there aren’t a ton of attractive investment opportunities, and a home is viewed as a safe place to park one’s money.
However, the Chinese government is taking a more proactive approach than Greenspan et. al.:
The evolution of Chinese policy in this regard is very interesting. There’s lots of sentiment nowadays that the Fed should have tried to pop the housing bubble, but there’s still a strong sentiment in the west that it’s a mistake to try to identify and target asset price bubbles. The Chinese evidently disagree and it’ll be interesting to see what kind of results that gets them.
Identifying the housing bubble might have been hard or unwise the first time around, but it’s a lot easier when you’ve seen the movie before. Even Baltimore, which has an extant glut of vacant housing (plus, no one really wanted to move here, except me), is dealing with the hangover-developers ringed the Inner Harbor with luxury condos (including Ritz-Carlton, at $5 million a pop) just in time for the bottom to fall out:
Just 17 homes priced at $1 million or more sold in the Baltimore metro area in April out of more than 650 on the market, according to Metropolitan Regional Information Systems.
Of course, housing prices are still hideously inflated in many places, including the Baltimore area, where median sale prices rose by $100,000 in a decade: