Is it me or does someone need to give Yu Jiang a talk on tulip bulbs and dot-coms?
From Bloomberg News entitled: China’s Desert Ghost City Show Property ‘Madness’ Persists
“Yu Jiang looks into the front window at his two-bedroom apartment in the center of Kangbashi, in China’s Inner Mongolia, and says he may buy another. The place has been empty for three years, as are as many as 90 percent of the units near it.
Designed for 300,000 people, Kangbashi, the new urban center of Ordos prefecture west of Beijing, may have only 28,000 residents, Bank of America-Merrill Lynch said in a May 10 note. Standard Chartered Bank called it “the Dubai of northern China” for its vacant skyscrapers and more than 1.1 trillion yuan ($161 billion) worth of new public buildings and local wealth.
Unlike in Dubai, where home prices have fallen more than 50 percent since mid-2008, buyers are still piling into Chinese housing. Yu says he sees no reason why the threefold gain on his investment shouldn’t grow.
“The future of Kangbashi is bright,” said Yu, 52, who runs a house-decoration business. “Government offices have moved here so the economy will develop well. Prices will rise.”
Investors are stockpiling empty apartments because there are few alternative investments, undermining government efforts to deflate a property bubble, said Patrick Chovanec, an associate professor at Tsinghua University in Beijing.
“Money is being dumped into property because there are no alternatives,” said Chovanec, adviser and former vice president of the Hong Kong venture capital firm Asia Mezzanine Capital Group. “Policy makers are nibbling around the edges of the core problem.
Although the government has restricted pre-sales by developers and curbed loans on third-home purchases, average property prices in China have risen more than 10 percent from a year earlier for four straight months.
Policy makers are considering a property tax in some cities to increase the cost of holding empty homes. About 50 percent of apartments are bought with cash, said Glenn Maguire, chief Asia- Pacific economist at Societe Generale SA in Hong Kong.
Fund managers James Chanos and Marc Faber, Citigroup Inc. economists Willem Buiter and Shen Minggao, and Harvard University professor Kenneth Rogoff are among those who have warned of a crash in China if the government can’t stop the property bubble. Buiter and Shen say it may take three years for the boom to bust while Faber says it could happen within a year.”
East, West, North, and South, the madness of bubbles is always the same.
Until, of course, the last sucker celebrates his “can’t miss” investment.
By the way, this is the same Ordos that was featured in this video that made the round earlier in the year. You’ve got to see it to believe it.
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