Taking the bullet train from Nanjing to Beijing, observe the surreal scenes of grey, skeletal residential high-rise residential and office blocks, the sad blank squares of the windows failing to conceal the fact they are empty of both interiors and inhabitants. Here are ghostly gusts of wind, not the clamour of construction. The views resemble stage sets from Fritz Lang’s silent film ‘Metropolis’, (1927) inspired by his first sighting of the Manhattan skyline as he sailed in from Germany. As in the film, families of skyscrapers, freeways and metro links (ok maybe not the biplanes) abound. Since the 90’s, new cities have risen phoenix-like and at a speed of development unheard of in the west where a patchwork of private ownership makes large building projects such a costly and time consuming business. Here is the real estate bubble writ large before your very eyes, and not on a dry balance sheet.
The truth is that more than 60 million empty apartments await buyers. 50% of the population are reported to be ‘worried’ about too high house prices and the Chinese Academy of Social Sciences estimated in late 2009 that residential property was too expensive for an alarming 85% of people. Premier Li Keqiang stated in March that “we must avoid the typical urban malady where skyscrapers coexist with shanty towns”, but in less favoured areas, this is in fact what is occurring. Is doomsday imminent, (as in the US collapse of the housing market after the demise of Lehmann Brothers in 2008), ' or is China riding the inevitable wave that comes from the urbanization of 400 million people in 20 years?
To understand the nature of the beast is to know that a new China is needed (fast) and urban planning does not want to preserve the old. Nanjing’s 1900 grey brick two storey terraces being rebuilt around Zhou Enlai’s old courtyard is the exception not the rule. In just two years, between 2011 and 2012, the country produced more cement than the US did in the entire 20th century to feed the maw of construction. To obtain this, whole mountains have been halved in size for their limestone. Secondly, no one actually owns property - the state owns all of the land, generating vast income for the local authorities by means of Government leases (of 30-70 years) to the property developers. This has not, however, prevented a distorted property market developing along the line of London’s with its high private rents, a lack of social housing, and an exponential rise in the use of property as investment by the middle classes as well as commercial investors. Finally, urbanization is far more lucrative than agriculture, so the municipalities have no choice but to lease out their land to pay for urban necessities such as infrastructure, education, health and social services.
To revive the comatose housing market, in early March this year the People’s Bank of China announced a surprise rate cut following last year’s 4.5% drop in housing prices. Furthermore, policies which encourage investors to ‘sit on’ unfitted out flats are being phased out. In more prosperous areas the problem is solving itself as new businesses or universities arrive, encouraged by a policy of low or even no rents, plus a metro link. This kick starts occupation. There is a desperate need to increase the proportion of social housing to 25% from the present lowly 3% to avoid growing inequality, and this policy is in the pipeline. However, in reality house prices need to fall further in order to entice buyers from poor quality homes into the new blocks.
Back to Lang’s ‘Metropolis’. In the story, a vast army of workers live underground in an urban dystopia contrasting with their masters’ life of life of ease in the skyscrapers. Liberated from their masters, the masses emerge to enjoy the leisured life of the middle classes in the tower blocks. And remember, Pudong, Shanghai’s Central Business District was once seen as a ‘ghost city’ but is now one of the most prosperous and populated places on earth. So, as in the film, will there be a happy ending?
First Published in "The Nanjinger" June 2015
The truth is that more than 60 million empty apartments await buyers. 50% of the population are reported to be ‘worried’ about too high house prices and the Chinese Academy of Social Sciences estimated in late 2009 that residential property was too expensive for an alarming 85% of people. Premier Li Keqiang stated in March that “we must avoid the typical urban malady where skyscrapers coexist with shanty towns”, but in less favoured areas, this is in fact what is occurring. Is doomsday imminent, (as in the US collapse of the housing market after the demise of Lehmann Brothers in 2008), ' or is China riding the inevitable wave that comes from the urbanization of 400 million people in 20 years?
To understand the nature of the beast is to know that a new China is needed (fast) and urban planning does not want to preserve the old. Nanjing’s 1900 grey brick two storey terraces being rebuilt around Zhou Enlai’s old courtyard is the exception not the rule. In just two years, between 2011 and 2012, the country produced more cement than the US did in the entire 20th century to feed the maw of construction. To obtain this, whole mountains have been halved in size for their limestone. Secondly, no one actually owns property - the state owns all of the land, generating vast income for the local authorities by means of Government leases (of 30-70 years) to the property developers. This has not, however, prevented a distorted property market developing along the line of London’s with its high private rents, a lack of social housing, and an exponential rise in the use of property as investment by the middle classes as well as commercial investors. Finally, urbanization is far more lucrative than agriculture, so the municipalities have no choice but to lease out their land to pay for urban necessities such as infrastructure, education, health and social services.
To revive the comatose housing market, in early March this year the People’s Bank of China announced a surprise rate cut following last year’s 4.5% drop in housing prices. Furthermore, policies which encourage investors to ‘sit on’ unfitted out flats are being phased out. In more prosperous areas the problem is solving itself as new businesses or universities arrive, encouraged by a policy of low or even no rents, plus a metro link. This kick starts occupation. There is a desperate need to increase the proportion of social housing to 25% from the present lowly 3% to avoid growing inequality, and this policy is in the pipeline. However, in reality house prices need to fall further in order to entice buyers from poor quality homes into the new blocks.
Back to Lang’s ‘Metropolis’. In the story, a vast army of workers live underground in an urban dystopia contrasting with their masters’ life of life of ease in the skyscrapers. Liberated from their masters, the masses emerge to enjoy the leisured life of the middle classes in the tower blocks. And remember, Pudong, Shanghai’s Central Business District was once seen as a ‘ghost city’ but is now one of the most prosperous and populated places on earth. So, as in the film, will there be a happy ending?
First Published in "The Nanjinger" June 2015