Confirmation: Western Property Market in Trouble

August 9: Western China Property Market Has "Quietly Collapsed". Chengdu has many unfinished buildings, HK developers are selling out, and the situation is as bad as it was in the early 2000s (I remember seeing many unfinished buildings with no construction activity at that time). Back then the economy was booming, but it still took 10 years to work through the inventory. According to the article, linked in that post, more than 30 buildings currently stand unfinished with work stopped.

Now there is some confirmation. FT Alphaville: Property bubble risks popping in China’s rural southwest
Sichuan province is one of China’s largest, in the heart of the country. We spent some time at a residential project called Universal City Centre, about 20km from Chongqing. The 1.08m sqm property has seen prices fall one-third from 4,000 to 5,800 psm one-third to 3,000 to 4,000 psm.

The sales agent told us this project was the best among the ten or fifteen projects in the area. “It’s not a good time to invest,” the agent noted. “It’s gone back to 1997 prices. No one is buying to invest any more,” she said.

Changshou is a city 80km northeast of Chongqing. There is a newly built highway that passes for miles through rolling hills before arriving in Changshou, an unassuming town with a beaten down main street and a row of stores.

But with a population of just 800,000, are as far as the eye can see there are around 200 high rise buildings, each at least 20 stories tall, containing 250 apartments. There were no cars in front of any we visited and none of them appeared occupied. We estimate there is 4m sqm of new construction or enough for 20 sqm per Changshou family.

...First, much of the data is suspect because both local governments and property developers have a vested interest in avoiding bad news. Second, our interviews in Sichuan suggest that banks are continuing to support property prices by rolling over developer loans and providing mortgages. In addition, new sources of expensive private capital through the shadow market is providing an illusion of continued support for a weak market.

If we are right, and there is a crisis in the rural areas, a weak market is going to have a chain reaction effect on national GDP and local government revenue.
As the post goes on to note, there's nothing particularly special about Sichuan. What's happening there is not an isolated event.

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