Another Unfinished Nightmare: City of Excavators Becomes City of Unfinished Buildings, Construction Continued for 3 Years

Zhangjiajie in Hubei Province (a popular tourist spot) is another example of the ongoing bursting of China's real estate bubble. The city was said to be filled with excavators in 2013 as construction boomed. Today it is sitting on 21 months of inventory after the market froze in 2013. The city had supply-demand ratio of 246.7% back in 2014, third highest of the 70 cities in the widely reported monthly NBS price survey. The number was originally reported here in 2014: China Home Buyers Underwater; More Ghost Cities Emerge

However, local supply and demand imbalance cities such as Yingkou, Ordos, Zhangjiajie supply and demand ratio reached 476.6%, 385.4%, 246.7%, storms of such property or the city will be difficult to avoid.

The city was also listed as tenth most likely to experience a crisis back in 2014: Chinese Cities Most Likely to Suffer A Housing Market Crash

10. Zhangjiajie, Hunan （张家界）
9. Qingyang, Gansu （庆阳）
8. Yan'an, Shaanxi （延安）
7. Pingliang, Gansu （平凉）
6. Guyuan, Ningxia （固原）
5. Ordos, Inner Mongolia （鄂尔多斯）
4. Dingxi, Gansu （定西）
3. Jiuquan, Gansu （酒泉）
2. Wuwei, Gansu (武威）
1. Longnan, Gansu （陇南）

This number is much worse today worse because inventory is still rising and sales are still falling, but media is still using the that old 2014 figure (which is likely based on 2013 data):

According to Zhangjiajie City People's Government website data, the city's commercial housing sale area 680,800 square meters, an increase of 5.5% yoy, of which sale residential area of ​​546,400 square meters, an increase of 52.8% yoy.

At the same time, Zhangjiajie City real estate sales area and sales amount of downward trend was on the rise. 2015 to November area of ​​419,500 square meters of commercial housing sales, down 15.6% yoy, the sales amount of 1.55 billion yuan, down 32.5% yoy.

The fact that problems which emerged in 2013 have only gotten worse, reminds me of the recent post on Jincheng (China's Credit Nightmare Unfolding in Jincheng), I wrote:

I've covered trust defaults and credit guarantee blow ups since they started popping up in 2013. Nearly all of them went away, but I wonder how much of that was due to extend and pretend, versus an actual clean up of the situation. If it was extend and pretend, swapping new debt for old, then the zombie industries are truly the tip of the iceberg, with all manner of unforeseen debt problems lurking beneath should credit conditions deteriorate.

Below, we find real estate problems weren't solved either, with one developer in Zhangjiajie having run away back in 2013. This makes me wonder how many of the individual local real estate collapses, credit cooperative failures, credit guarantee implosions, trust failures and ghost cities covered on this blog over the years are still extant problems.

China bulls and bears alike are generally in agreement that China has the ability to "solve" problems by government fiat (such as financial repression), and most articles covering local real estate or financial collapse mention the government formed a work group to solve the problem. The bullish view says costs get shifted but growth goes on, while bears believe the costs eventually show up in slowed GDP growth, slower lending, currency depreciation, etc. Yet the recent stories show even many bears may have been too optimistic, that actual full blown crises may have been swept under the rug in the hopes that growth would solve them. If this is the case, there are not only zombie steel mills and zombie coal mines, but zombie economies and zombie governments.

After the jump are two individual cases from the iFeng article on Zhangjiajie.

Case 1

Pearl of the Orient

Only 20% Sold, Deveoper Blacklisted

Oriental Pearl is one of the biggest unfinished projects Zhangjiajie city.

March 9, under the guidance of insider, the reporter went to the Xixi Ping Yongding Yongding Road and Station Road intersection Lishui River Trade City wealth Sunshine complex project.

Owners Mr. Zhang told reporters, Oriental Pearl District Yongding is a wealth Sunshine Trade City project, under construction by the end of 2011, when according to the Real Estate Development Co. Shixiong commitment, before the end of 2012 will be completed throughout the residential area of ​​the main project construction, roofing works as well as internal and external painting works, sewage pipes before the end of February 2013 supporting the project, the district road hardening, green, lighting and other projects be completed and acceptance of delivery.

However, the reality is skinny. "Residential construction did not proceed as scheduled launch time of the delays, and now real estate developers in March 2016 also failed to schedule submitted to, and refused to fulfill the liability for breach of contract." Zhang said.

Local real estate sector, a source told reporters: "The problem faced by real estate companies Shixiong, ostensibly because of declining sales, poor internal management, capital construction and capital return ratio imbalance, leading to delay the project appears overdue submitted, Construction poor and other issues. the fundamental problem is the developer of the property market lack the necessary assessments, overly optimistic, hastily investment, leading ultimately failed to materialize, and no real ability to resolve the risk. "

Reporters from local government authorities information obtained evidence to judge the people.

When the reporter access to government information found in Zhangjiajie City Local Taxation Bureau released the second quarter of 2015 tax arrears announcement dishonesty publicity, the real estate development company impressively Shixiong, taxes balance of over 640 million, and due to bad credit and It has been blacklisted. In addition, the company is in Zhangjiajie City Housing Authority in 2015 included major issues of social stability risk assessment report prepared by municipal maintenance of stability do the project.

Another:

Case 2

Guihuayuan

Developer defaulted, fled, buildings empty

March 9 to 10, Yongding District People's Court for 2 days to convene coordination meetings guihuayuan residential property owners to resolve closeout costs of unfinished projects. However, it was the owners did not agree, the meetings again to no avail.

Gui Garden District Zhangjiajie city is a famous residential flats, located in Zhangjiajie Octopus Din Tai Road and Road intersection, covers an area of ​​over 30,000 square meters, construction area of ​​about 100,000 square meters, the total number of 770, developers Zhangjiajie Ming-home buyers limited liability company.

Currently, the project has sold 452 sets, 246 sets of remains unsold, but because developers boss Zheng Yongming was in 2013 because of funding problems, "fled", has failed to materialize more than two years, the district has been sealed judiciary. Up to now, the main project Although the completion of all residential water, electricity, gas and other part of the tail is also being installed, and in May 2014 has been submitted to the owners, but the district roads, landscaping, drainage, underground garage, security, fire protection , elevators and other infrastructure projects not yet completed, the occupancy rate of less than 30%.

It is involved in Yongding District People's Court Coordination A source revealed to reporters, Gui Garden project failed to materialize because the developers Ming-home buyers limited liability company misappropriated Shoufangkuan offsite investment failure, defaulted debt up to 1.6 billion.

According to Gui Garden owners reflect that the district purchase contract submitted to the time of October 31, 2013, the developers extended to December 31, 2013 submitted, until the date submitted, the owner found that houses the Ministry of developers and people are walking the floor space. In desperation, more than 400 owners petitions in several government departments under the coordination of the end of May 2014, the developer had to be sold housing delivery owners.

The aforementioned source said Gui Garden District unfinished reason, except that the overall real estate market impact, the regulatory department ineffective oversight is also an important reason. According to "China Real Estate News"