Can someone explain to me why is this problem? The houses that they've built are still standing, people can still live in them, what's the problem?
Personal anecdote. I had a mortgage for 2 full years before being able to move in to my apartment because I bought it before a single stone was laid. The way this works here is that the money is held into an escrow account for most of time, with the construction company only receiving payments in installments (e.g. 'roof finished'). Lastly, the final 5% of the purchase amount is held back until 3 months after the unit is finished, which can be extended if large defects are found. Bankruptcy risk was covered with an insurance, which was a condition to the mortgage.
I guess the money being in escrow puts the risk on the builder instead of the buyer.
anecdotally, we were looking at houses to buy and many of the nice, well-priced ones, had multiple bids and even price increases (e.g. throw another $10k on it). not quite a full-on bidding war, but it became clear that if you want in you get in early, and pay for the privilege's.
same idea, except the place ain't built yet.
The other model, where investors fund development before the house is sold, aligns both parties. The developer/investor wants to produce a good product so that it will sell at a high price and the buyer has the chance to inspect the property before purchasing.
That should be a solution. But not usually that simple, sadly
The developer/investor wants to produce a product that LOOKS good so that it will sell at a high price. Read the other comments about quality
And, those investors often sell the property before it is finished or before it’s even started. So you have the same problem, with a longer chain of middlemen
And they have excess debts that their assets no longer cover because the housing market crashed.
Additionally, they just took on obscene debts. The banks did not do the appropriate due diligence (hypothesis is the local governments interfered).
But I know only what rando YouTube videos have told me.
Basically the same corruption that societies have been battling ever since societies existed.
Why should the government and the non-investors pay for government agencies that enforce regulations? If investors cannot handle due diligence, let them pay private agencies to secure their investments.
Pardon my French, numbers on paper my ass.
Economic uncertainty leads to people killing themselves. Suicide rates go up during recessions and depressions.
https://www.frontiersin.org/articles/10.3389/fpubh.2022.9070...
> In general, economic crisis, unemployment rate and other macroeconomic measures are associated with increased risk of suicidal behavior at the aggregated level.
That will trigger a run.
The Great Depression, the Great Recession.
> Why should the government and the non-investors pay for government agencies that enforce regulations?
Apart from them being ostensibly a communist nation, it's good for business. Everyone's business.
This is also why Greece got a lot of help from Germany and the IMF about 10-15 years back.
> If investors cannot handle due diligence, let them pay private agencies to secure their investments.
How? The investment is a promise to build a home.
> The Great Depression, the Great Recession.
If China descends into chaos, it could be alot worse than the Great depression, since so much of the world depends on China, and since they have a crazy arsenal of weapons.
Their physically ability to deliver homes is not what's at stake here.
https://www.reuters.com/world/china/unfinished-evergrande-ap...
No, they are demolishing whole empty cities to keep the prices up.
https://asia.nikkei.com/Spotlight/The-age-of-Great-China/Con...
The article talks about buildings in kunming being demolished. While kunming definitely went through a big bubble, I would hardly call it a ghost town now.
Practically, just like any other real estate developer, they have tons of unfinished projects and now we don't know the future of them. And of course it's just one of the problems.
The problem is you assume they're legit. Who says they actually completed the projects (houses)? Who says there are no defects and that people can live in them? How do you even come to that conclusion? Just assume in good faith?
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.
1.) as of 2021, There are nearly 800 unfinished Evergrande projects in more than 200 cities across China. https://www.nytimes.com/2021/09/28/business/china-evergrande.... Even if the buildings were unfinished, the buyer still had to keep paying the mortgage!! and if they didn't, and the courts foreclosed the property and sold it, the buyer is liable for the fees and the differences. Most of the time the buyer is hugely underwater since the real estate price in 2023 has crashed 50% - 70% from peak. And now, because your social credit is shot, you no longer can purchase tickets for flight or train, making it even harder to try to find jobs to pay back your debt.
2.) China is known for its tofu dreg buildings. Just google online if you want to see brand new condos with facades blown off, cracked foundation, sand mixture where cement should be, tilted buildings, etc. This is especially true with buildings built in the last few years. And this is especially true for buildings from bankrupt mega developers like evergrande and country garden.
3.) This is a domino that leads to a series of systemic collapse. Country garden, the second largest developer in China, missed bond payments as small as 22 million recently. It had a capitalization of 60B in 2018. Now it has a debt of 200B. Zhongzhi enterprise missed payments recently, being one of the largest trust company. People are reminded of Lehman from these events. https://www.businessinsider.com/china-economy-beijing-lehman.... Doesn't help that export and import just collapsed by double digits in July, exports to US dropped 23% y/y, there's huge youth unemployment of at least 22%, foreign investment dropped 90% in 2023, and the worst flood in the last 50 years just hit China's biggest grain region.
Oh yeah, and because Chinese citizens are outraged by Fukushima release, they are boycotting Japanese seafood, and in general all seafood, which has decimated the entire seafood industry in China overnight, with no traffic to seafood market or restaurants.
4.) Even if the buildings were done, a lot of the buildings are empty and not livable due to shoddy finish, foreclosures, no public amenities working, lack of residents (owners are selling the units at 50% price cuts), etc. Imagine living in a huge 50 story building with only a few residents at night. https://www.architecturaldigest.com/story/see-inside-a-ghost...
This one is hilarious. China imports very little seafood from Japan, and they just single handedly tanked their domestic seafood industry for a few bananas worth of radiation.
This could be the first time in history that the "green" / petroleum alliance's anti-nuclear FUD has ever had a positive outcome for the environment.
I read "deplorable construction standards in some of these tree houses. "
I was about to question your statement...