The unprecedented urbanization that China has been experiencing has caused a “spectacular property boom” over the past decade. Migrants moving to cities from the countryside are increasing demand for city housing as do the increasing middle class looking for an upgrade. Residential sales have shot up 35% in the last three quarters of this year versus last, while the prices for new homes has increased by more than 20% in some major cities.
However, many are growing suspicious of the boom, calling the market a bubble. As discussed in class, many areas in China have had local governments overdevelop in anticipation of becoming hubs of economic activity that just has not yet been realized. In places like Yingkuo Coastal Industrial Base, rows of buildings sit empty while property salesmen claim that big companies are building factories nearby. Local governments have also developed such ghost towns outside big cities to the same results. Despite the “waste of resources” these developments are proving to be, according to the government, 144 cities in 12 different provinces are planning 200 new towns. Figures are also suspected of being corrupted, as local governments have been buying the new homes, rather than individuals. In addition, there is concern of the massive amounts of debt that developers are incurring. Lastly, it is vogue for Chinese companies to acquire developments overseas rather than domestically in China despite the local governments’ anticipation of their business.
Interestingly, perhaps in China even if property bubbles burst in smaller cities with local inflated markets, they may not take the national economy down with them.