China's ghost cities not so ghostly

A huge amount has been written about China's real estate "bubble". While a lot of what is written can be dismissed as the frothy ramblings of permabears who see bubbles everywhere, there have been a number of points of legitimate concerns about China's housing market. One claim which I have always had difficulty reconciling with the China's urbanisation (and rational financial behaviour by investors) is the reports of "ghost cities" - large scale residential developments with associated retail shopping malls and other facilities which appear to be empty.

There is little room to dispute the fact that there are a lot of recently completed developments which are empty. However, it Nicole Wong of CLSA has provided a rational explanation for this phenomena - in China new developments are sold as empty shells and it typically takes about three years for a development to reach a point where it has a substantial level of occupancy. Since she visited 137 projects on a recent trip, it can be safely assumed that her position is supported by first hand observation (i.e. it is not just some random theory).

Further details and explanations are here.

While there are aspects of the Chinese real estate market which remain of concern, I am now have a reason for dismissing the "ghost city" claims.