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House Prices Decline 70% in Erdos

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Uploaded on Nov 28, 2011

China's real estate industry just went through
September and October bleak period.
The 'ghost town' Kambashi District in Erdos
had more bad news coming in.
Mainland media reported the 'ghost town'' property market
has crashed,
and the house price fell nearly 70%,
though the local government denied this.
Scholars believe 'ghost towns' property crash is on its way,
and this will start China's real estate' and financial turmoil.

Chinese Enterprises newspaper reported information
by a long time Erdos' resident, following the crisis of usury.
It stated, the property prices in 'ghost town' declined greatly,
from RMB 10,000 / sq. m. last year to RMB 3,000 now.

The local 'Jinxin Han Lin Yuan' project, for example,
had its second-hand house prices at ca. RMB 10,000 / sq. m. , but now it is only RMB 3,750 / sq. m.

'Ghost Town' is the name given by the US' Time magazine
to the Kangbashi district in south-central Erdos.
This new city costed the local government RMB 17 billion
to build on an area of 32 square kilometers.
Since there are not many people in the area,
the real estate supply is in surplus there.
Coupled with inadequate facilities, this area has few people
to live in, inspite of the rows upon rows of tall buildings.
In the evening it is all dark,
truly resembling a 'ghost town,' hence its given name.

Financial News Network reported that this ghost town
is a result of the real estate bubbles.
Latest data shows housing in Erdos is 3 to 4 sets per capita,
homeownership is almost 100%, vacancy rate is ca. 66%.
Only if the resident population grows by 200%, and no new
houses get built, can the existing new houses be utilized.
However, considering the situation of the population
conditions in Erdos, this seems impossible.

According to data, house prices now in Erdos are six times
those six years ago. A new villa costs over RMB 20,000 / sq. m.

Houses could not be sold, however outside real estate agents
have also been getting into Erdos.
Due to the poor sales, house prices had all fell.
Lowring prices became the choice of many real estate agents.

Duan Shaoze (scholar, Beijing Normal University): "When
the price is so high, and so many houses are empty,
if you still spend money to build new houses, that is wrong.

Real estate losses in China's economy are not due to a bubble
burst, but to wrong past investments, which are exposed now."

Kangbashi District Administrative Committee won't admit
70% fall in house prices, claiming this to be a nonsense.

China Times reporter visited the site and said many local
real estate sales offices to be empty or with sluggish turnover.
Liu Wei, real estate network director in Erdos said,
the actual decline is currently between 20% and 30%.
Some developers still hold up the prices, despite difficulties,
thinking price lowering wouldn't necessarily increase sales.

Many industry insiders believe that the property market crash
in Erdos would have come sooner or later.
Real estate commentator Gu Haibo said, if this is not stopped,
and the absurd "growth has slowed down" continues to violate the law,
next year this phenomena will spread outside Erdos!
Consequences will be more serious.

Duan Shaoyi thinks Erdos itself does not need so many houses.

And that this does not come from a real market need,
but from speculations, thus the prices' collapse is inevitable.

Duan Shaoyi: "I think this is a rational regression,
that is, the value of real estate is not worth so much money.
House bubble is a serious thing,
it is better to burst out earlier!
Its development is irrational, and will cause a lot of wastage,
leaving those areas without funds and resources."

Prof. Xie Tian at the University of South Carolina also sees
the fall of Erdos house prices by 70% as something normal.

Prof. Xie: "Erdos, the ghost town, has been empty for quite
some time. So it is logical that it begans from there.
The next step we should pay more attention to
is the other ghost towns.
For example, some overly-built residential areas
in Zhengzhou and other such places.
This is not an isolated case, but the beginning of a storm.
The bigger storm is quite likely on its way."

In addition, Prof. Xie pointed out that China's real estate
is not worth the investment.
This is because of the Chinese Communist Party' policy,
where the public can only purchase the right to use properties.
One is actually paying to only rent it, the price for which
is much higher than in the US and other developed countries.
Unlike other countries, where buyers have ownership rights
over the property, in China one can only have rental rights.

NTD reporters Lin Li, Li Mingfei and Xiao Yu

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