A while back I read a story about the enormous amount of empty real estate in China. It was an interesting read, but nothing compared to actually seeing it. It’s downright creepy. Like something from a movie.

Adam Meyer of NewGeography, though, thinks it’s overblown:

Quite simply, the demand is there. The booming housing market is a revolution of sorts. This is really the reflection of the emergence of a true Chinese middle-class. The U.S. media, on the other hand, tends to remain focused on a massive China real estate bubble, perhaps as a projection of America’s own recent experience of real estate exuberance.

Yet there are some major differences. For example, few Chinese purchase homes with little or no money down. Banks are not lending ‘creative mortgages’ such as ARMs to homebuyers. Government measures seek to discourage speculation.

For instance, Chinese home buyers are limited to purchasing 2 homes and must put at least 30% down for the first home and 60% down for the second home. Investment by foreigners into the real estate market is strictly regulated in order to reduce the amount of ‘hot money’ coming into the country. Non-Chinese citizens are limited to purchase one home only and must hold onto it for 5 years before being allowed to resell it.

Due to the massive size of China’s population, the majority of homes being purchased are flats in newly-built residential high-rise compounds. The size of these units might be a little too cozy for Americans or even Europeans, but to young Chinese homebuyers (of which most are first-time buyers), it represents an aspiration unimaginable only a few years ago.

If the video is to be believed, though, it’s not a simple matter of more housing than people. Or, for that matter, simply waiting for the Chinese commoner to become a little more wealthy to be able to move in. They’re building real estate that would be expensive in parts of America. They’re not just counting on the creation of a working-to-middle class population. They’re counting on a new professional class. Millions and millions of them. In order for people to be able to move into these houses, wages must go up considerably. If wages go up considerably, they lose one of their main competitive advantages.

None of this is particularly aided by the stringent demands of home-ownership over there. Yes, our bubble occurred at the consumer level more than anywhere else, but it can just as easily occur at the producer level. It’s just a matter of who is left holding the hot potato and not a question of how hot the potato actually is. These things are being built with the anticipation of future sales. Those sales, due in part to the restrictions put on the consumer, have to come. There’s no shortage of people in China and no shortage of people on the countryside that would be more economically situated in urban areas. Building a bunch of housing on spec to accommodate those people might make sense. Or building progressively roomier housing for those working their way up the latter and vacating their housing for people moving in from the countryside. But instead, they’re building for an upper class that is a long way off.

Oddly enough, I am reminded a bit of Deseret. Not the property bubble thing, exactly, but China’s attitude towards their poor and non-urban. The LDS church is notably generous to its struggling members, of course, but there was always an odd (and unexpected) vibe that urbanism/suburbanism is better and that they would rather their country brethren just move to the city, get white collar jobs, and be done with it. A sort of desire to will it into being, but without a clear roadmap of how they plan to get there.