The original argument mentioned China as a country that does not have a housing shortage. Somehow you just decided that the poster is suggesting we transition our system to a complete free for all, unregulated market. It's unclear why or how you arrived at that conclusion.
Also, the Chinese have been simulating the housing sector to encourage domestic growth. The Chinese housing sector did not grow out of control just due to lack of regulation. It was also financial stimulus and incentives to encourage building.
So, you just pounced on that other commenter, accused them of something they didn't say, and despite believing that you understand the Chinese housing market you actually have no clue. You are literally the Dunning Kruger effect manifest info a hacker news commenter.
I said the problem in China is speculation, they don’t have a housing shortage. You can’t just build your way out of a housing problem if the demand signals are messed up.
>There's also considerable evidence that China's housing bubble has burst along with this economic shift. But the bizarre nature of China's housing market has hidden this effect for a while.
We get a lot of bizarre financial news about China over here. The other day there was some sort of corporate bond default (I believe it was China's first, if you can imagine that) that pundits on Bloomberg thought was the start of the end for China, as if businesses don't default for some reason or another, all the time.
The fallacy is in comparing the Chinese housing market to that of the US. China manages (or at least is trying to) real estate prices, and much of the inflated price kicks back to the government as a form of consumption tax which is used to fund further infrastructure development. This housing infrastructure is important when millions of people are moving from rural to urban areas.
Who knows if these policies will continue to work, but there is no doubt they are currently working. There has never been a growth story like this, and they are still only 1/5 the GDP per capita of the US.
Housing in China has nothing to do with the real estate market.
The real estate market is tied to GDP growth so there is such an excess of housing that there are ghost cities. It's also when you hear stupid stories about power plant shutdowns and going green.
I've been in China for over 5 years and can assure you that almost all news that is presented in the west is either misleading or just wildly out of context, to give a vastly different perception.
But there is far more DIY opportunity in China, but you have to do it yourself. Nobody is going to show you how or help.
> Shenzhen grew from 100,000 people in the 1980s to 13M now with no housing affordability crisis...by building.
I wouldn't use China as an example of solving the housing problem by simply building. There's currently a large oversupply problem [0] and, not entirely unlike the US (but more extreme), excess supply of housing has lead to people simply owning more than one property as an investment strategy.
Counterpoint: China — a country building more housing than anybody, yet having the most surreal housing crisis.
The country had at some point 20% vacancy of the total housing stock. And of course, a typical Chinese city is packed with if not skyscrapers, then highrises.
You need of course factor in Chinese peculiarities, main being the real estate being a feeding lot for corrupt officials, and land lease sales being that big of a revenue source for the local governments.
I am really a proponent of the Chinese system. I’m a real estate investor and this “free market” isn’t going to last much longer since owning vacant homes will net you more than virtually anything else you could do legally. Real Estate is a free money machine, and it won’t stop until we adopt realistic government controlled system.
I read in the FT yesterday that China has enough empty homes to house 90m people. I would think even for a place with 1.4B people, that's a lot. It's hard to imagine so many empty homes that all of Germany could live in it. There was an aerial photo of one of these developments that reminded me of SimCity, when you try to cram as many people in as possible.
Does it snowball, though? The credit/asset spiral (well described by Soros in his books) seems very real. With the economy exploding over the last decades it would seem that NOT loading up on debt was a dumb move, so it makes sense that all the housing developers and everyone else has done so.
China is a big place. Just because there's no demand for housing in one part of China does not mean that there is no demand for housing in all of China.
Imagine solving the affordable housing problem, but by doing so you create a nation scale ponzi scheme with trillions of dollars on the line because it also simultaneously made up the majority of your country's economic activity for 2 decades. That's what China is in the pickle with.
It's great they have all this housing, except there's both nobody to live in them (they were investment homes) and there's all this debt tied up in even completing the ones that were ponzied out.
They basically took the US 2008 Mortgage fiancnial crisis and said, WE CAN MAKE IT BIGGER, BY A LOT.
To be fair, housing in China is used as a savings vehicle. They have few, if any, social safety nets available to them, and don't trust the stock market.
Housing in the US doesn't have nearly the same speculative force behind it.
> affordable housing is in the interest of everybody except property developers.
it is, but it's also complicated as the problems are quite a bit different in China then in the US
the reason there was a bubble in China was because they sold (barely) affordable (apartment owned, not rented) housing to a huge amount of people while not producing it. Like they financed it similar to a snowball system. Group B buys housing but pays for the housing bought by Group A then Group C pays for Group B etc. But at some point it fell apart and people realized the housing they should have gotten "soon" isn't being build (or stuck in a partial state) and the company has no money anymore. (Kind oversimplifying the whole thing.)
To top that off there are (state build) ghost cities which have cheap appartments and acceptable building build quality, the problem is there is nothing there, no jobs(!), no supermarket, bus, people, "anything", if you are unlucky even electricity might be cut of in parts of it, (also I guess for rent not apartment ownership). (But there are also enough examples of western media reporting about ghost cities messed up because turns out just a few years later it wasn't a ghost city anymore.)
And to make that worse it's not just Evergrande. It outside of the areas with a lot of central government focus there where many cases of houses building companies which had money issues trying to pretend everything is fine by cheeping out on building cost to a point where houses build that way are basically unusable. Through from the outside it looked like there is still progress. Issue with that is, it is really hard to guess how bad it is, pro-china media most times doesn't mention it and if it says it's a rare exception and/or videos are fake, anti-china media says it's bad to a point it's everywhere, and you find little in between. And both sides are known to lie a lot.
I dunno. The government incentives aren't that big, and people do stupid stuff with and without government help.
There's no doubt that the government (and neo-liberal mainstream economists) failed to prevent the bubbles.
But there's other factors at play. Housing takes a long time to reach an equilibrium. It can take decades for people to move out of a house that's too big for them. The market just doesn't respond quickly, which is a recipe for instability and chaos (just ask anyone who's studied control theory, or chaos theory).
There might be a few players who are smart enough to see this, but the average real estate investor isn't a Wall Street quant, or even a trader. They are a 20-or-30-something year old, with no financial nous at all. They see 10 years of solid growth (due to demographic changes, income growth, and government intervention), jump on the wagon, and that creates a little more impetus.
Do you really think that the government is entirely pro-cyclical? That they choke supply, and give out free money while prices are rising; and increase supply and curtail loans while prices are falling? I doubt it. And if the Chinese government is to blame, why is it so damn regional? The Shenzhen bubble is nothing like the Beijing one, which is nothing like the Shanghai one, which is nothing like the Inner Mongolia one. Some of that is local government actions, but I dont't think it is in most places.
> After it popped, housing prices started plummeting.
Prices haven't plummeted in China. Sales volume has seized since the red families control the real estate agencies. They have added more incentives, like easier access to hukou, and have eliminated limits on how many homes you can buy.
Your comment might be relevant to e.g. Vancouver, but China has completely different problems. In China, nobody is buying the houses at all. Not real estate speculators, not people who intend to reside there. Nobody.
> prices could collapse 90% (they won't), and it would only affect speculators and people who bought their first home in the last 5 years
How do you arrive at that claim? ~78% of all household assets in urban China are held in residential housing ownership. A 90% housing price collapse would be beyond catastrophic to China's economy and household wealth across the board. In rural China, residential housing values represent ~65% of household wealth.
China's household assets being so extremely concentrated to housing is unique among major economies. In the US, the residential real-estate market represents closer to 35% of household assets (in the UK it's around 50%).
Financial assets are only 12% of urban Chinese household assets, compared to 43% in the US.
China can't afford anything to go wrong in their residential housing market, much less a 90% price decline.
Government incentives aren't that big? In the US or in China?
You think empty cities crop up all on their own? With no rents being collected, you think people will just keep building and tying up their capital for no reason?
If you mean the US, the incentives are not trivial. Interest rates are a big one and they are kept artificially low. You can write off your interest. You don't have to pay capital gains taxes on the first $250k of profit on a house.
There are first time buyer programs too. And standards for lenders were greatly relaxed around 2000, with borrowers no longer required to put 20% down.
Fannie and Freddie also helped by accepting the risks of loaning to buyers with less than adequate credit. Lenders had no incentive to even check the claimed income of buyers.
So, not sure how all these things aren't that big. I guess housing prices just double on their own for no reason.
Also, the Chinese have been simulating the housing sector to encourage domestic growth. The Chinese housing sector did not grow out of control just due to lack of regulation. It was also financial stimulus and incentives to encourage building.
So, you just pounced on that other commenter, accused them of something they didn't say, and despite believing that you understand the Chinese housing market you actually have no clue. You are literally the Dunning Kruger effect manifest info a hacker news commenter.
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