CHINA: Property prices plummet across China, including Inner Mongolia's famous "ghost town" Ordos city

Record ID: 510487

  • Title: CHINA: Property prices plummet across China, including Inner Mongolia's famous "ghost town" Ordos city
  • Date: 3rd December 2011
  • Summary: ORDOS, INNER MONGOLIA REGION, CHINA (DECEMBER 1, 2011) (REUTERS) EMPTY SQUARE IN KANGBASHI NEW TOWN NEW APARTMENTS COMPLEX IN CONSTRUCTION CONSTRUCTION WORKERS WORKING ON SQUARE VARIOUS OF CONSTRUCTION SITES VARIOUS OF ORDOS MUSEUM PEDESTRIAN CROSSING LIGHTS ON EMPTY STREET APARTMENT BUILDING VARIOUS OF BANNER SHOWING "ORDOS KANG BASHI" IN FRONT OF NEW APARTMENT COMPLEX (SOUNDBITE) (Mandarin) 65-YEAR-OLD LOCAL RESIDENT YANG ZHOULUO SAYING: "The locals all loaned their money and all money has been invested in property. Now no-one can sell apartments, and the money is gone." CONSTRUCTION WORKERS WALKING INTO CONSTRUCTION SITE LARGE CONSTRUCTION SITE NEXT TO PROPERTY SALES CENTRE VARIOUS OF MODELS OF NEW BUILDINGS IN EMPTY PROPERTY SALES CENTRE PEOPLE WALKING IN FRONT OF CONSTRUCTION SITES IN DONGSHENG OLD TOWN CRANE ON TOP OF CONSTRUCTION SITE (SOUNDBITE) (Mandarin) LOCAL RESIDENT FANG FAN SAYING: "Not many people live in this city and too many houses have been built, so on average there are more than three apartments for every single person. Unless there are many migrant workers in this city and this place becomes a suitable place for them to live permanently, only then will people decide to buy apartments and live here." WORKER SWEEPING EMPTY STREET IN FRONT OF MANY CONSTRUCTION SITES CONSTRUCTION SITES VARIOUS OF PROMOTIONAL POSTER FOR NEW APARTMENT SHOWING HAPPY FAMILY SHANGHAI, CHINA (DECEMBER 02, 2011) (REUTERS) VARIOUS OF HEAD OF RESEARCH AT E-HOUSE CHINA, HUI JIANQIANG, USING COMPUTER
  • Embargoed: 18th December 2011 12:00
  • Keywords:
  • Location: China, China
  • Country: China
  • Topics: Economy
  • Reuters ID: LVA2AU125HEYPBXAT001PZLE04QC
  • Story Text: The empty plazas and hulking concrete shells of China's "ghost town," deep in the steppes of Inner Mongolia, are a potent symbol of how China's property boom can turn to bust.
    The city of Ordos secured 1.15 billion yuan ($181 million U.S. Dollars) from banks to erect the new district in 2004. The government even lavished 503 million yuan ($79 million U.S. Dollars) to build a museum that features a wavy yet rock-like exterior and aspires to become the landmark of the new district, Kangbashi (pron: Kang-Bah-Shee).
    But the district's population remains sparse, even though it has housed the government's headquarters for five years.
    The greater Ordos city is home to 1.4 million people, according to official statistics. But fewer than 50,000 live in the new district, a government official told Reuters.
    The cranes that helped to fuel the city's property boom stand motionless. Construction normally halts in Ordos when winter temperatures drop too low to lay concrete. But some projects stopped early this year and there's no interior work to keep workers through the winter.
    "The locals all loaned their money and all money has been invested in property. Now no-one can sell apartments, and the money is gone," said 65-year-old local resident Yang Zhouluo. (pron: Yang Jou-luo)
    But there's another, more worrisome trend afoot in Ordos. In the old city, where people actually live and work, cranes have fallen idle and migrant workers are fleeing.
    Prices have fallen by almost a third in Dongsheng, the old city, a severe example of what's happening to property prices throughout China.
    The central government has signalled an easing stance while many local governments have already relaxed policies.
    But local residents remain worried.
    "Not many people live in this city and too many houses have been built, so on average there are more than three apartments for every single person. Unless there are many migrant workers in this city and this place becomes a suitable place for them to live permanently, only then will people decide to buy apartments and live here," local resident Fang Fan said.
    What's happening in Dongsheng is also happening in a wider range of Chinese cities, including Shanghai and Beijing.
    Nationwide, home prices fell in October from September for the first time this year, official data showed, and private surveys pointed to a third consecutive monthly home price fall in November.
    The lead researcher of a Chinese property consultancy firm said the price drop is also obvious in several other Chinese cities.
    "In places such as Wenzhou and Beihai, government control as well as the market price's drop and adjustments, are also very obvious. But they're not as extreme as Ordos. This may also happen to smaller cities where capital growth is drastic. But I don't this is widespread in China," said E-House China's head of research Hui Jianqiang. (pron: Hui Jian-cheeang)
    Almost two years into China's property tightening campaign, the central bank said on Friday (December 2) that home prices were at a turning point and banks were more concerned about chain reactions rather than the sharp price fall of 20-30 percent itself.
    More worrisome, the cooling real estate market, contributing to about 10 percent of Chinese growth and affects a chain of 50 sectors, could drag the real economy to a hard landing.
    Just an hour's drive away from Beijing, Tongzhou city is cluttered with construction sites and tightly packed residential complexes.
    Real estate companies have cut prices in hopes of attracting more buyers, but the shops remain empty.
    A real estate chain company's local branch manager said the area's housing prices have fallen by $780 US dollars per square metre within a year.
    "The property prices in Tongzhou have fallen by about 5000 yuan per square metre compared to the same time last year. For example, the occupancy of this compound now exceeds 50 percent mainly because the first phase of development has a higher occupancy rate. The third phase, which was put on sale in 2008 and 2009, has an occupancy rate of about 30 percent," said branch manager of 5i5j, Wu Qiong. (pron: Woo Cheeong)
    But some locals remain optimistic about the housing market in the long run.
    "I think Tongzhou's property prices will fall a bit in the short term. But in the long term, I think the trend is for prices to rise because land is a limited resource and the population is rising. This limited resource will be used up one day," said 34-year-old local resident Cui Yonggang (pron: Chui Yong-gang)
    Inner Mongolia's "ghost town" could be considered an outlier. But the Dongsheng old city is typical of Chinese provincial cities. Many of its 600,000 residents still live in trim, low brick buildings that are dark, cramped and indifferently heated.
    Their real demand for better housing is likely to sustain China's housing market for decades to come, as long as a hard landing doesn't wreck the economy.
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