[amarte]

I'm surprised no one has mentioned China here.

I was recently able to travel to China for the first time and was fascinated to learn about their housing market. Apparently the Chinese government doesn't have a property tax.

For men in China, owning a home is already incredibly important. It's practically a requirement for getting married, to the point where a woman's family would almost certainly disapprove of a marriage if the man doesn't own a home (which, keep in mind, would be called an apartment in the US). So that coupled with China's huge population means there's already a major demand for owning a home.

China is also experiencing incredible economic growth. Local governments are pouring money into "economic development areas" where you can find modern shopping malls, skyscrapers for businesses, and lots and lots and lots of (what we would call) apartment buildings.

And this isn't just happening in Beijing or Shanghai. There are "tier 3" cities in China with populations the size of LA and NY where you see clusters of dozens and dozens of 40-50 story apartment buildings shooting up.

I was told that the value of homes in these economic development areas -- even in "tier 3" cities -- is going up by an absolute minimum of 10-15%/yr (that's being conservative). So if you have money in China, of course you invest in housing. There's no property tax.

When I see these clusters of apartment buildings popping up all over the country, I really wonder how many people are actually living in them, and how many are just getting turned around year after year for a profit. Chinese people have an unfathomable amount of trust in their government (from a westerner's perspective), so when I asked some friends about this, their response was basically, the government will take care of it. Regardless, very interesting place!

[zanny]

Policies like that are going to backfire in the long run though. If the wealth being generated by productive exports is being hoarded in unutilized housing there are long tail effects that will slow down the economy - the housing sitting idle isn't productive, and when the investors try to capitalize on their property in the future they will just be rent seeking the difference between the construction price and their sale price.

Its happening around the world. The rich realize that one of the scarcest resources is space and land and are powerful enough to manipulate governments into just letting them hoard their money in housing. Because for the states where this happens everyone loses except the rich - housing becomes prohibitively expensive for the working class, rising property values leech productivity and growth and stall out consumerism, and all the money that created the situation could have better been used creating productive business rather than rotting in a cyclic property investment bubble.

[bobthepanda]

There are two huge reasons why China has so much investment in property; it is very hard for Chinese to invest outside of China, and the domestic financial market is extremely cyclical and untrustworthy. Money that in the US would be in 401ks, IRAs, funds, bonds, and general brokerage accounts is all shoveled into anything that looks like it could maybe result in any return. It's why China has had big bubbles in financial fads; yesterday it was P2P lending and today it's crypto.

China restricted capital mostly because it learned from the 1998 Asian Financial Crisis that rapid capital inflow and outflow is extremely destabilizing. The problem is now Chinese capital is basically a pot boiling over, and if you crack the door open enough capital will flow out that could destabilize the global economy and pop the Chinese bubble. The hangover would eclipse the previous big deflation of the Japanese economy.

[djakjxnanjak]

I wouldn’t underestimate citizen confidence in the government as a means of propping up housing prices. Investing in property is the main way people give their vote of confidence in the current global plutocracy.

[rorykoehler]

>There are "tier 3" cities in China with populations the size of LA and NY where you see clusters of dozens and dozens of 40-50 story apartment buildings shooting up.

Same thing is happening in India. Frightening pace of urban development.

[barry-cotter]

> I was told that the value of homes in these economic development areas -- even in "tier 3" cities -- is going up by an absolute minimum of 10-15%/yr (that's being conservative). So if you have money in China, of course you invest in housing. There's no property tax.

It helps a lot when the government refuses to register sales when the price is under the guidelines. If you put a price floor in the market can stay irrational even longer than normal during a bubble.