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Comment by seanmcdirmid | Hacker News Reader

2. There are empty homes in 10 year old complexes in Beijing and Shanghai.

3. Many of the ghost districts never fill up before they are torn down as eye sores. Kangbashi will only fill up if coal makes a big come back, which is highly unlikely. Tianjin financial district is mostly a bust so far, but a derelict building or two for a decade is not abnormal.

The problem is really simple: China lacks a property tax, so housing is seen as a speculative investment rather than just a place to live in. And China is not wanting for speculators.

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Why is it seen as a better speculative investment than other opportunities. After all, someone is left holding the bag when the investment is found to be unused -- which is a cost just as much as a tax would be. What other considerations are outweighing that cost?

Because property values have skyrocketed in big cities. Of course, that's no guarantee that they'll continue to rise, but, this history looms large in media and culture. Everybody knows somebody who became rich this way: "My classmate's parents bought him a condo in Beijing in 2008 and now it's worth millions!"

There is also the continued migration from rural to urban, ensuring that demand will continue to increase for a while yet.

China controls how capital can leave the country. There is a lot of money just sloshing around within China hungry for investment. And the financial sector is relatively underdeveloped with a volatile stock market.

As a result, Chinese money loves chasing bubbles in search of returns, like P2P lending and crypto.

http://scholars-stage.blogspot.com/2014/08/passages-i-highli...

The entire Chinese economy is as rigged as the government can make it. The stock and bond markets are fake, the state owned enterprises are run as fiefs of the Party-State, not for profit, all the major banks included. Nothing is trustworthy. Combine that with a property market that’s been going up for decades and a ruling class that would not be happy if the middle class that started rioting if their savings in property went up in smoke and you have a fake property market too.

One thing I found when looking into investing in Asia is that p/e ratios are... extreme.

Purchase to rent ratios are also extreme in china. Good investing is tough.

>The problem is really simple: China lacks a property tax, so housing is seen as a speculative investment rather than just a place to live in.

The government should read Henry George. Well, everyone should read Henry George.

Houses are seen as speculative investments for the vast majority of US home owners also.

Not really in the same way. High property taxes mean you usually can’t sit on a property and wait to flip it, it has to be put to productive use because deprecation (through taxes) happens right away. No one can really afford to buy an apartment building, decide that renting the units isn’t worth it and just sit on the empty unrenovated apartments until buyers come along.

In China, you can buy property and just sit on it. Many apartments are never even renovated because market level rents are too low to justify that. Yes, they apartment costs 7m yuan to buy, but only rents out for 10k yuan/month that doesn’t even cover interest. Keep in mind that renovation actually decreases an apartment’s value because new owners have to unrenovate it first.

US property tax of 1% or rarely 2% is not much of.a speed bump when you are chasing 10+% gains.

10% gain won’t even cover sales commissions. If you can ignore property taxes and do nothing with your property, you are looking to make 50% at least in a few year period.

I thought it was clear from context that I meant annualized.

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