# Overbuilding and the Resulting Real Estate Bubbles



## The Cebuano Exultor (Aug 1, 2005)

The speculative overbuilding that happened circa 2005-2007, as a result of cheap credit markets, is the main culprit behind the massive real estate bubbles the world over. At that time, it seemed like the sky's-the-limit and it was a very exciting time for skyscraper fans like us.

To an average fan of skyscraper and other infrastructure construction, how should we reconcile our need to pleasure ourselves (with brand-new infrastructure) with the need for sustainability, at a point when there is a drastic need to cutback on the world's infrastructural excesses?

As a general information buff, I am also interested to know which city you guys think is the worst offender in terms of infrastructural excessiveness? Is it Dubai? Is it Toronto (with its massive condo boom)? Or, Is it any of the Chinese second-tier cities?


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## ssiguy2 (Feb 19, 2005)

China would be at the top of the list. 
It has built who small cities with apt/condo towers which have become ghost towns. They have had the same problem with many of their huge shopping centres which are literally 95% vacant. China has the habit of building for the sake of building and it's all Beijing's fault. 
The central government demands that all areas have to reach certain economic growth levels so they build apt/condos that aren't needed and elaborate subway systems that they cannot afford. The huge Metro expansions maybe great for the travelling public and urban planners but they have built them all with borrowed money. Contrary to what many believe it is not the central government that have been building these huge system but rather the local and state ones. Problem is that they build the lines but have almost no taxation power to pay for them. They pay for the lines with residential real estate appreciation and by allowing developers to build on areas around the stations and pay them back by trying to eventually sell the units they build. 
It's an elaborate ponzi-scheme..............borrow money and pay it back by getting money from other people who will have to borrow the money to pay you. It makes the assumption that they will beable to continually build apts/condos and sell them. If they need more money for Metros etc then they build more condos and pray they can sell them to pay back their loans. Now, however, they are in a real fix as not only are real estate prices plunging in China but so are sales. It is estimated that China has a glut of some 50 million unsold housing units. They aren't selling so the local/state governments can't pay back the loans for their Metros. 
Much of the Chinese "economic miracle" is none of the sort. China has created a giant ponzi scheme based on cheap credit and endless contruction. 
China excels at manipulating it's economic and fiscal position. When looking at the central government debt the amount owed is just 14% of GDP, a very low figure than any western country would kill to have. What they don't mention is the massive state & local debt. They have been borrowing money at a dizzing pace to build roads, housing, and transit. People aren't building these massive new Metro systems free of charge so they can be good little communists. These things cost REAL money. 
These loans are from both quasi-legal private banks and the Bank of China. Whether these be local, state, or federal debt is irrelevant as there is only one Chinese tax payer. 
It is estimated that as of Nov 2011, the Chinese combined state debts now equal a whopping 160% of GDP.......the same rate as Greece.


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## Ribarca (Jan 28, 2005)

^^
Can't the Chinese not cover the debts you mention with the massive inflow resulting from the positive current account balance?


Overbuilding is still going on now. Cheap credit in cities like Buenos Aires and Manila lead to massive overbuilding. We never learn. Bubbles and crashes have already occured for centuries.


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## The Cebuano Exultor (Aug 1, 2005)

*@ ssiguy2*

^^ I recently viewed a video put-up on YouTube by RussiaToday's Keiser Report. In the video, Max Keiser stated that it is, in fact, the U.K. which has the worst debt-to-GDP ratio in the world, and not Zimbabwe or Japan, with total debt stock (British sovereign debt + British financial-sector debt) amounting to about 1,000% of its annual GDP.

Based from many other videos posted by the Keiser Report, the City of London was, in fact, responsible for all the derivatives trading and hypothecation activities that led to the near collapse of AIG, the collapse of Lehman Brothers and MF Global, and the fall-from-grace of Bernie Madoff. In fact, the recent move by Prime Minister David Cameron in securing the British financial system (i.e. the City of London) from any form of imposed regulatory conditions from the European Central Bank illustrates that the current British administration clearly understand that if they give-up some of Britain's financial sovereignty to the ECB then their entire ponzi scheme of hypothecation, or even hyper-hypothecation, they will no longer be able to continue peddling their worthless financial products.

I also read an article (I forgot where it was) which largely attributed Dubai's crazy real-estate boom to exported speculative tendencies of British banks. The article goes on to state that UK's financial sector is clearly addicted to asset bubbles.

In my opinion, Dubai has got to be the city that has experienced the worst and most excessive real estate bubble relative to its size. I mean, it had ambitions to construct enough infrastructure to house an additional 6-7 million inhabitants within the next two decades, when the city, in fact, had only slightly less than 2 million residents as of 2010. Furthermore, much of Dubai's mega-projects were for serviced-based activities (i.e. themeparks, malls, and residential communities) which do not create actual wealth.

Now, I don't know why people keep bringing-up China's real-estate bubble when China has 1.3 billion people. Prices in major cities are, indeed, very high but they are nowhere near what Tokyo had during Japan's great bubble heydays in the late 1980s. And with huge foreign-exchange reserves amounting to about US$ 3.0 trillion, China has some "safety cushion" from the effects of a "hard-landing". And whenever I see Chinese masterplanned communities, I still get the impression that they seem doable. That which I cannot say for much of Dubai's mega-projects (i.e. DubaiLand, Arabian Canal, The Waterfront, The Universe, The World, The Palm Deira, The Palm Jebel Ali, Bin Rashid Gardens, Dubai World Central). I mean, if all of Dubai's dream projects were to be completed, an urban entity that is like the combination of Orlando, Las Vegas, and Atlantic City will still not be able to hold a candle (in terms of housing, leisure, and tourism infrastructure capacity) as this "Dream Dubai". At least China's overbuilding phenomenon is more well-rounded, with not only residential, leisure-centric, and tourism-based booms but also for manufacturing, power generation, utilities, and transportation infrastructure.


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## Suburbanist (Dec 25, 2009)

^^ You can't add up financial debt sector without adding the financial assets. It is basic accountancy.

Any normal bank will have, for every £ 1 in capital, something like £ 5-10 in debt and something close to that in assets. That is the essence of banking. It is insane to add only the financial debts without adding the financial assets.

Moreover, I couldn't disagree more with the "services doesn't create wealth" mantra. Wealth is created when someone (people, companies) aggregates value to its inputs. The myth that only products you can touch are "wealth" is obviously that - a myth.


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## alyers (Nov 30, 2011)

If they need more money for Metros etc then they build more condos and pray they can sell them to pay back their loans.


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## Dahlis (Aug 29, 2008)

The problem here in Stockholm is the other way around. Not enough is being built and hosing costs are very high.


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## poshbakerloo (Jan 16, 2007)

The UK saw a lot of suburban development and highrise office development although I wouldn't say that too much as built...


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## isaidso (Mar 21, 2007)

Dahlis said:


> The problem here in Stockholm is the other way around. Not enough is being built and hosing costs are very high.


Why doesn't supply meet demand in Stockholm?


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## Jim856796 (Jun 1, 2006)

Can the late-2000s-early 2010s global economic/financial crisis be a warning or punishment for overbuilding that happens in any city like Dubai? A skyscraper boom would probably constitute overbuilding or hyperconstruction.


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## isaidso (Mar 21, 2007)

A boom is fine if supply is meeting demand.


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## Svartmetall (Aug 5, 2007)

isaidso said:


> Why doesn't supply meet demand in Stockholm?


Regulations being very tight and so scaring away investors. The rental market is quite heavily controlled making investment in rental properties not a very attractive move for most. This is to ensure there is affordable property in the city, however, instead, it did scare investors away. 

Things have relaxed a bit and now we've got a building boom, however, it still can't keep up with the number of new arrivals to the city. Stockholm is growing fast.


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## SydneyCity (Nov 14, 2010)

Australia's housing supply has actually decreased, ie we're not building enough to cope with demand.


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## Madman (Dec 29, 2003)

poshbakerloo said:


> The UK saw a lot of suburban development and highrise office development although I wouldn't say that too much as built...


The UK suffers from a vast under supply of development (particularly in southern England), which causes its own version of a property bubble.


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## megacity30 (Oct 8, 2011)

Madman said:


> The UK suffers from a vast under supply of development (particularly in southern England), which causes its own version of a property bubble.


I hear there is a minor building boom in London's commuter belt...


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## Jonesy55 (Jul 30, 2004)

Not really, housing construction is at very low levels at the moment.


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## isaidso (Mar 21, 2007)

SydneyCity said:


> Australia's housing supply has actually decreased, ie we're not building enough to cope with demand.


Is that nationwide, or just in some markets?


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## eklips (Mar 29, 2005)

isaidso said:


> A boom is fine if supply is meeting demand.


Not necessarily, because if prices are going up, supply can create it's own demand, as was the case in the US during the 2000-2007 timeframe. Which, in a context of massive deregulation, and huge profits due to new forms of credit, triggered the massive crisis we are still living with today.


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## Dimethyltryptamine (Aug 22, 2009)

isaidso said:


> Is that nationwide, or just in some markets?


It's pretty much nationwide. 



> Australia's housing shortage worsened by more than a sixth according to the latest annual report on the industry, as high prices kept many would-be buyers out of the market.
> 
> The gap between housing demand and supply increased by 28,200, or almost 18 per cent, to 186,800 housing units in the 12 months to the end of June 2010, the government's National Housing Supply Council (NHSC) report reveals.
> 
> The annual report on the state of supply shows NSW and Queensland had the largest shortfalls of 73,700 and 61,900 homes, respectively.


http://m.smh.com.au/domain/real-est...s-supply-fails-to-keep-up-20111221-1p55v.html





> AUSTRALIAN housing markets displayed a generally resilient performance in 2011, reflecting the inherent security of residential real estate in this country, particularly when compared with housing markets in similar open-market economies.
> 
> The year was always set to be a period of correction for Australia's housing markets following the unsustainable growth in house prices recorded through 2009 and 2010.
> 
> Between January 2009 and June 2010, Melbourne's quarterly median house price rose by nearly 30 per cent, with Sydney's up by almost 20 per cent over the same period. All other capitals also recorded big rises in house prices over those 18 months.


http://smh.domain.com.au/real-estat...sing-the-real-estate-roof-20120102-1phqq.html


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## samnelson (Feb 13, 2012)

Wow I had no idea China was such a culprit when it comes to overbuilding. Here in the USA, California, and specifically, Southern California, had a huge inventory for years. It affected everyone; construction workers to labor unions were out of work. According to Movoto, we're seeing signs that everything real estate is about to change. *Crossing fingers*


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## Talbot (Jul 13, 2004)

It seems to me that in Houston suburbs there is a big over-building of commercial real estate, I have seen many shopping centers that have been built for years with empty spaces in them.


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## Kensingtonian (Nov 8, 2008)

eklips said:


> Not necessarily, because if prices are going up, supply can create it's own demand, as was the case in the US during the 2000-2007 timeframe. Which, in a context of massive deregulation, and huge profits due to new forms of credit, triggered the massive crisis we are still living with today.


This is true. Hence, we have the advertising industry which is built around manipulating people to feel dissatisfied with what they have so they go out and buy stuff they don't need.


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## Suburbanist (Dec 25, 2009)

^^ "Need" is a extreme word. Maslow and his pyramid already figured that out 80 years ago.

In the strict sense of "survival with the longest possible lifespan" , 80% of everything you can find in a develop world country's typical house is not needed, including much of its own space. But to raise the bar is called progress, or at least material progress.


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## diablo234 (Aug 18, 2008)

Talbot said:


> It seems to me that in Houston suburbs there is a big over-building of commercial real estate, I have seen many shopping centers that have been built for years with empty spaces in them.


I think you can say that the US in general has more supply than demand in terms of commercial real estate, especially when you look at how "over retailed" the country is, and of course with many companies such as Circuit City and Borders going out of business, that only exacerbated the situation.


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## Suburbanist (Dec 25, 2009)

diablo234 said:


> I think you can say that the US in general has more supply than demand in terms of commercial real estate, especially when you look at how "over retailed" the country is, and of course with many companies such as Circuit City and Borders going out of business, that only exacerbated the situation.


OTOH, building of new commercial developments has been very slow, which mean the glut will clear itself one day and more commercial spaces will be needed. 

There is also the need for new places for retailing for the sake of novelty.


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## poshbakerloo (Jan 16, 2007)

You can see the huge amounts of construction in the US compared to the UK. I knows its probs a few years old now but go on Google Maps satellite photography. Look around the edges of cities in the US and you can see loads of building sites of housing development. But in the UK its very rare.


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## BE0GRAD (May 29, 2010)

Suburbanist said:


> ^^ "Need" is a extreme word. Maslow and his pyramid already figured that out 80 years ago.
> 
> In the strict sense of "survival with the longest possible lifespan" , 80% of everything you can find in a develop world country's typical house is not needed, including much of its own space. But to raise the bar is called progress, or at least material progress.


Raising the bar has its limits from which it cannot be called progress anymore ,but rather unnecessary luxury that spoiles people. It is always better whan people are less demanding as their satisfaction with less leaves them much more resources to spend on more usefull things.


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## Suburbanist (Dec 25, 2009)

BE0GRAD said:


> Raising the bar has its limits from which it cannot be called progress anymore ,but rather unnecessary luxury that spoiles people. It is always better whan people are less demanding as their satisfaction with less leaves them much more resources to spend on more usefull things.


That is up to the individual decide 

Once basic needs like shelter and food are met, people starting behaving differently because the higher you climb the Maslow pyramid









, the more individual-specific its manifestations become.

Water is a basic thing: you either drink it directly or embedded in other foods or drinks. You can't achieve that in much different ways be you dirty poor or filthy rich. 

"Achievment", OTOH, is a different story: people feel they accomplished meaningful things in life under very different criteria according to their personalities and how they met the other inferior but most basic needs before caring about achievement.

Houses have everything to do with that: up to a point, it is a matter or having a roof and some basic sanitation that prevents you to sleep in the streets and protect you from the natural elements and sanitary-related diseases. 

Then, as you move up in the ladder, the house is a space for socialization of the family and a source of some self-esteem.

Move even higher and you find people whose housing choice is much more about branding themselves and being recognized or accepted than anything related to functionality (think of houses in very prime locations that command a steep price increase just because of their location within a city).


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## Skyrazer (Sep 9, 2009)

Dimethyltryptamine said:


> It's pretty much nationwide.


No not really. Only city I can think of that can claim to have a shortage is Sydney, everywhere else in Aus has plenty of supply.

Melbourne especially is well into oversupply.


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## BE0GRAD (May 29, 2010)

Suburbanist said:


> That is up to the individual decide
> 
> Once basic needs like shelter and food are met, people starting behaving differently because the higher you climb the Maslow pyramid
> 
> ...


Yes but what I wanted to say is that achievement doesn't have to go with greed ,selfishness and irresponsibility and there llies the difference between good and bad way of achieving your goals. One can get recognition of the society without extra spending on luxury and the other cannot get that recognition no matter how luxurious his life is. But the crucial difference between those two, assuming they have the same income, is that the humble guy ,by being satisfied with less, has more money to spend or save in a more usefull way which cannot be said about the second guy whose spoiled lifestyle makes him dependent on luxury and all the costs (and debt problems) which come with it. 

What made the first guy humble and the second guy spoiled isn't however related to their choises as much it is related to the education they've received from their environment during their lives. That's why it should be the duty of the state to discourage the private sector to promote materialistic and individualistic lifestyle among the population (which results in more irresponsible spending and more money for them) and instead encourage more humble, moderate and responsible lifestyles.


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## Suburbanist (Dec 25, 2009)

BE0GRAD said:


> Yes but what I wanted to say is that achievement doesn't have to go with greed ,selfishness and irresponsibility and there llies the difference between good and bad way of achieving your goals. One can get recognition of the society without extra spending on luxury and the other cannot get that recognition no matter how luxurious his life is. But the crucial difference between those two, assuming they have the same income, is that the humble guy ,by being satisfied with less, has more money to spend or save in a more usefull way which cannot be said about the second guy whose spoiled lifestyle makes him dependent on luxury and all the costs (and debt problems) which come with it.
> 
> What made the first guy humble and the second guy spoiled isn't however related to their choises as much it is related to the education they've received from their environment during their lives. That's why it should be the duty of the state to discourage the private sector to promote materialistic and individualistic lifestyle among the population (which results in more irresponsible spending and more money for them) and instead encourage more humble, moderate and responsible lifestyles.


It is not up to the state to promote "humbleness" or anything.

That is a variation of 1920s-fascism: the State as source of virtue.

Some people will put more emphasis on material aspects. Other people will put less. People are different, and should be allowed to pursuit (doesn't mean everyone will succeed) their own achievements they deem important according to their own criteria.

Leave the State out of it!


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## sweet-d (Jul 20, 2010)

damn suburbanist said something i partly agree with.


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## BE0GRAD (May 29, 2010)

Suburbanist said:


> It is not up to the state to promote "humbleness" or anything.
> 
> That is a variation of 1920s-fascism: the State as source of virtue.
> 
> ...


Regulating the society, including promotion of good things and discouraging or even banning bad things is the main function of the state. If not the state ,than who? Only the state is capable or willing to do it. Besides, the state already promotes things such as anti-fascism and you say that is fascist.


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## Suburbanist (Dec 25, 2009)

Be0grade, ultimately the State is not an amorphous entity but people in charge of running or ruling it. Herein lies great danger when you empower or allow humans to be the moralist-in-Chief deciding what is good and what is bad in personal aspirations, sex lives, religion, your clothes style, your drives on your life etc


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## desertpunk (Oct 12, 2009)

isaidso said:


> A boom is fine if supply is meeting demand.


Not if more of the demand is from speculators. That's what differentiates bubbles, when organic demand is superceded by speculation. That's what happened in some cities in the US before 2008: speculators crowded out other buyers and resorted to selling to other speculators as prices spiraled upward (albeit on a much smaller scale than what is occurring in China). While there can be distinct differences such as the amount of leverage in the market and rates of absoption, the distortion created by excess speculation is unmistakable.


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## desertpunk (Oct 12, 2009)

Suburbanist said:


> OTOH, building of new commercial developments has been very slow, which mean the glut will clear itself one day and more commercial spaces will be needed.
> 
> There is also the need for new places for retailing for the sake of novelty.


Office and retail in the US are entering a mature cyclical replacement phase. The deleveraged consumer will be slow to jump back into ridiculous patterns of personal consumption while businesses, especially the financials, that cut office staffs and operations may never restore those positions even if the economy regains full steam. The biggest driver for new office construction is simply the replacement of older inventory (some of which is being converted to residential). That's a 30-40 year cycle. New retail is both blunted by online retailing such as Amazon and the lack of new housing developments. As more Americans become renters, retailers are looking at urban locations but even those new stores are rarely built without guaranteed available parking. In some places, the retail and office gluts will only be reduced by conversion to some other use, a process that is gaining momentum as landlords grow impatient with vacant properties.

I suspect that in places like China, empty office and retail structures will eventually simply be demolished and replaced by newer ones regardless of the market demand because the demand for growth based on fixed asset investment is far more compelling to the central authorities.


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## BE0GRAD (May 29, 2010)

Suburbanist said:


> Be0grade, ultimately the State is not an amorphous entity but people in charge of running or ruling it. Herein lies great danger when you empower or allow humans to be the moralist-in-Chief deciding what is good and what is bad in personal aspirations, sex lives, religion, your clothes style, your drives on your life etc


Maybe Saudi Arabia is the people who run it, but in well organized countries the state is a system and people ,including those who run it, must act according to its laws. I must remind you again that the state already interfere with private decisions of people per example by discouraging smoking ,encouraging more efficient energy consumption or banning racism. And guess what? That has huge positive effects on society. So the state should play a more active role here by promoting responsibility and moderacy through education system, media and public campains so that people are less inclined to by stuff they don't really need ,which make them more vulnerable to debt related problems and which disables them from spending that money on some more usefull stuff one of which could be raising one or two more children.


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## bayviews (Mar 3, 2006)

ssiguy2 said:


> China would be at the top of the list.
> It has built who small cities with apt/condo towers which have become ghost towns. They have had the same problem with many of their huge shopping centres which are literally 95% vacant. China has the habit of building for the sake of building and it's all Beijing's fault.
> 
> It is estimated that as of Nov 2011, the Chinese combined state debts now equal a whopping 160% of GDP.......the same rate as Greece.


We got a fortaste of what might be yet to come back in the late 1990s, when the Southeast Asian financial & housing bubbles, largely driven by ethnic Chinese bankers, realtors, developers, buildiers, etc. burst. . 

Here, with a much bigger country like China itself in play, we could see a lot worse. Yet, as in Southeast Asia, things will bounce back within a few years. The longer-term looks good for China, But as we've seen over the past dozen or more years Southeast Asia, things aren't likely to go back to what they were during the boom.


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## Xusein (Sep 27, 2005)

I don't think the US market as a whole will recover fully from the crash for at least another 2-3 years. Upside is that if you can get a mortgage, with low interest rates, it's a pretty good time to buy. Rental market in these parts are going bananas though, 3% vacancy rate.


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## Bannor (Jul 23, 2011)

I think the Singaporean model of public housing is the best one. In lots of european countries the housing prices are just too high because the property owners don't want to overbuild and reduce the value of their formerly built homes.

Overbuilding should be applauded, and controlled by the state. It doesn't have to mean we should get commie blocks, and good architects could be used. But if run the same way as singaporean public housing is, there will be much less speculation in the market. Housing would be cheaper compared to salaries, and the economy could rather experience growth in sectors that are worth investing in. Property is just lame, and like banking, it is leeching off the society.

I actually think the chinese government have some of the same ideas as me, so I think they'll be fine. Salaries will catch up soon enough too.


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## Ocean Railroader (Jun 18, 2011)

We've had this going on in Virginia for decades in that they built strip mall after strip mall and built them bigger and bigger and even in the 1990's and early 2000's you had massive shopping centers where only 40% was rented out and still across the street they built another one. During this time I was very worried that all the open forested areas would be destroyed by this and our areas government's don't care about green space. What ended up happening around 2010 everything melted down and we had cases where they moved 50 foot high hills and built parking lots but the builders most of them went bankrupt and you now have several places where these former shopping center construction sites are over grown with five foot tall weeds and small trees are coming back.


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## zaphod (Dec 8, 2005)

Isn't finance the root of most bubbles? Regulating banking, lending, investment, etc, and repealing policies that might encourage excessive real estate speculation(like rich foreigners investing to buy citizenship) would go a long way to preventing these things from happening in the first place.

If restrictions on development were enacted, wouldn't that just cause housing to become unaffordable? To me I'd rather accept occasional speculative bubbles(restricting credit so they are the less harmful cash based type like in China) than have to tell someone who has saved money to buy a home that they shouldn't be allowed to afford one.



> Raising the bar has its limits from which it cannot be called progress anymore ,but rather unnecessary luxury that spoiles people. It is always better whan people are less demanding as their satisfaction with less leaves them much more resources to spend on more usefull things.


You know to avoid being called a hypocrite I think you need to lead a much more simple life.

I suggest the first thing you do is cancel your internet subscription and sell your computer. You can always do work or school from a cyber cafe or a public library, so a PC is really just a luxury.


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## mhays (Sep 12, 2002)

It's possible to be frugal and be on the internet. That's a minor factor compared to a big house full of stuff, driving everywhere, flying every month, etc.


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## bojemrythem (Aug 18, 2012)

You have to build the property for the real estate and also develop your real estate property business. It is only depends on the place and try to always find some best property for making your home or offices.


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## michaelfsfl (Oct 23, 2012)

alyers said:


> If they need more money for Metros etc then they build more condos and pray they can sell them to pay back their loans.


That is why most Chinese nowadays prefer to rent their property for a living. This way they can save huge tax deductions from the government.


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## Rascar (Mar 13, 2012)

> That is why most Chinese nowadays prefer to rent their property for a living. This way they can save huge tax deductions from the government.


What could possibly go wrong  I have heard some Chinese do not even rent out their residential investments, as they would lose value faster then the commensurate gain in rent.


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## Dahlis (Aug 29, 2008)

Bannor said:


> I think the Singaporean model of public housing is the best one. In lots of european countries the housing prices are just too high because the property owners don't want to overbuild and reduce the value of their formerly built homes.
> 
> Overbuilding should be applauded, and controlled by the state. It doesn't have to mean we should get commie blocks, and good architects could be used. But if run the same way as singaporean public housing is, there will be much less speculation in the market. Housing would be cheaper compared to salaries, and the economy could rather experience growth in sectors that are worth investing in. Property is just lame, and like banking, it is leeching off the society.
> 
> I actually think the chinese government have some of the same ideas as me, so I think they'll be fine. Salaries will catch up soon enough too.


That sound like a very bad idea in a developed economy. Public housing should be a very small part in a well functioning market. If the rules are easy to understand and the buearocracy minimal the market will regulate itself.

The cities job should be to make the plans so that there is enough land to be built on and in good locations.

The main problem in many european countries are heavy regulation.


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## city_thing (May 25, 2006)

Skyrazer said:


> No not really. Only city I can think of that can claim to have a shortage is Sydney, everywhere else in Aus has plenty of supply.
> 
> Melbourne especially is well into oversupply.


Uh, no it's not.

Towers are still rising all over the place and buyers are still there. It's still near impossible to find somewhere to rent in Melbourne.


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## Slartibartfas (Aug 15, 2006)

Dahlis said:


> That sound like a very bad idea in a developed economy. Public housing should be a very small part in a well functioning market. If the rules are easy to understand and the buearocracy minimal the market will regulate itself.


Markets have a rather bad track record at that. We have lots of public housing here and it goes far beyond the commie block stereotype (even if the lowest cost settlements are like that). It is the large share of public housings and the continous muncipal involvement in subsidizing affordable appartments, not just for the poor but, at better quality and slightly higher prices, for the middle class, that make Vienna a relatively affordable big European city. 

Minimal bureaucracy (ie regulation) leads to shitty housing quality. I've seen that in Ireland and the US where you get terrible quality for much higher prices in comparably central locations of cities of comparable importance. 

Why would I want leaving it all to the market if not doing so gives me better yet more affordable housing options? It is better to let the market do its job, but where it fails to step in from municipal side.


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## Dahlis (Aug 29, 2008)

Slartibartfas said:


> Markets have a rather bad track record at that. We have lots of public housing here and it goes far beyond the commie block stereotype (even if the lowest cost settlements are like that). It is the large share of public housings and the continous muncipal involvement in subsidizing affordable appartments, not just for the poor but, at better quality and slightly higher prices, for the middle class, that make Vienna a relatively affordable big European city.
> 
> Minimal bureaucracy (ie regulation) leads to shitty housing quality. I've seen that in Ireland and the US where you get terrible quality for much higher prices in comparably central locations of cities of comparable importance.
> 
> Why would I want leaving it all to the market if not doing so gives me better yet more affordable housing options? It is better to let the market do its job, but where it fails to step in from municipal side.


Just look at the kind of houses that where built in the 1800s, they where built with very little or no regulations. Thats where people want to live today, thats where you find the highest prices. 

With heavy regulations only the large companies and the municipalties can afford to build.

Im not talking about allowing poor building materials im talking mainly about cutting administration times. There should be clear rules applied to each lot, containing for example building height, positioning towards the street etc. Administarting the rules should be a simple task of looking at the blueprints and comparing it to the plan.


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## Suburbanist (Dec 25, 2009)

Dahlis said:


> Im not talking about allowing poor building materials im talking mainly about cutting administration times. There should be clear rules applied to each lot, containing for example building height, positioning towards the street etc. Administarting the rules should be a simple task of looking at the blueprints and comparing it to the plan.


Exactly my standpoint. 

It is not the whole of the government to "design" neighborhoods such as "oh, let's put some one-bedroom apartments here to attract young professionals" and all the other b.s.

Moreover, all countries (including the one I'm currently living in, The Netherlands) that have extensive social housing program end up with politicizing of housing market. So a new party could mean a new design for buildings. It also creates a whole bureaucracy to manage things like registration systems for social housing, waiting lists (with every possible criteria), and all of that can be abused or mismanaged by public employees.


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## Slartibartfas (Aug 15, 2006)

Dahlis said:


> Just look at the kind of houses that where built in the 1800s, they where built with very little or no regulations. Thats where people want to live today, thats where you find the highest prices.


Aesthetics are great of those buildings but living conditions were bad to terrible, depending on the object. Only modern revitalization saved them and made the fit for modern use. Yes, that is often done by private actors and I have not the slightest problem with that. 

For most inhabitants, "the highest prices" are not what they need but affordable living space with good quality of life. If the market manages to supply the people with, its fine, if not, the public hand has to act, by subsidizing or regulating certain aspects, not for the sake of it but to secure such affordable living options. 



> With heavy regulations only the large companies and the municipalties can afford to build.


I wonder what all those small to medium sized companies are doing then in Austria, where regulation is quite strong on these issues. Many people are constructing homes on their own behalf as well and seem to manage quite well. 


> Im not talking about allowing poor building materials im talking mainly about cutting administration times. There should be clear rules applied to each lot, containing for example building height, positioning towards the street etc. Administarting the rules should be a simple task of looking at the blueprints and comparing it to the plan.


Sure, it should be kept as simple as possible, but also complex as necessary, to secure a certain quality standard as minimum.


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## Slartibartfas (Aug 15, 2006)

Suburbanist said:


> Moreover, all countries (including the one I'm currently living in, The Netherlands) that have extensive social housing program end up with politicizing of housing market. So a new party could mean a new design for buildings. It also creates a whole bureaucracy to manage things like registration systems for social housing, waiting lists (with every possible criteria), and all of that can be abused or mismanaged by public employees.


The problem was that municipal governments did exactly what you demand yourself: pooling the poor together in some ghetto, to keep them away from the middle class. That was a disaster and multiplied the problems that come from poverty concentrated into some ghetto. 

Nowadays planners tend to avoid that, they do what you hate which is mixing more expensive and cheaper living space with each other. If you distribute poverty it is still bad but there are no failed neighbourhoods then were the problems explode by the density of misery, resulting in higher costs for the overall society than if you don't have these ghettos.


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## Suburbanist (Dec 25, 2009)

^^ Middle classes have no obligations to share the "burden" of the poor. So the real estate market should be used to decide where people live, and then let government provide the appropriate infrastructure (from transportation - public and private - to heavy policing in areas where problems concentrate).

HAving less income don't make people automatically more prone to crime. Actually, families that are dysfunctional and have problems like drug addiction, domestic violence etc. are already more prone to be poor, their children not have good school achievements etc. 

When you have more homogeneous areas, households that are merely poor by lack of income, but not dysfunctional, families will usually do extreme sacrifices (like working 2 jobs the whole life, never taking vacations, spending 50% of their income on housing) just so that they can live in a better area and their children can escape the moral and social misery of the "ghettos", having hopes for a better life. 

You see that happening in US where the quality of your house, and its price relative to the region, is usually a very good predictor of how good public schools in an area will be since they are funded mostly out of property taxes on narrowly-defined catchment areas.

Social housing ALWAYS create dysfunction in the markets, anyway. I resort to the example of Netherlands where I live. On most big cities, especially Amsterdam, Utrecht and Den Haag, there is a big gap between social housing (or rent controlled) rental prices and free market prices, since the "regualted" housing stock covers 60-70% of total residences. As a result, waiting times for social housing are above 8 years for places like Amsterdam. To complicate things, Amsterdam hasn't sold land for development last 70 years (technically, all new developments are built over "perpetual leased land" from the city) and keeps a very tight grip on what is built and where. 

I hate most of the modern philosophies or urban planning, and wished civil engineers took over such functions dislodging planners themselves.


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## isaidso (Mar 21, 2007)

Suburbanist said:


> Middle classes have no obligations to share the "burden" of the poor. So the real estate market should be used to decide where people live, and then let government provide the appropriate infrastructure (from transportation - public and private - to heavy policing in areas where problems concentrate).


As long as you realize that's just an opinion. Not all societies find that view acceptable.


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## Slartibartfas (Aug 15, 2006)

Suburbanist said:


> ^^ Middle classes have no obligations to share the "burden" of the poor.


You can have an asocial world view if you like, I don't care. But my point was not one of selfless solidarity but one of an egoist who manages to think further than one step ahead. The problems of intense and concentrated poverty lashes out at the city as a whole and substantially reduces quality of life, safety etc. 

It is cheaper (I am talking about costs that the general society has to bear in any case unless it does not mind that the city as a whole is going to the dogs) not to let it derail like that but to distribute poverty instead of ghettoizing it. 



> So the real estate market should be used to decide where people live, and then let government provide the appropriate infrastructure (from transportation - public and private - to heavy policing in areas where problems concentrate).


No one is forced to live anywhere. To the contrary. There is also no one forced to build anything. I am talking about positive incentives. It works in Vienna. 


> HAving less income don't make people automatically more prone to crime.


No, living in a completely derailed, failed and crumbling poor ghettos with failing schools and infrastructure makes people prone to crime. In short your ideal of concentrating poverty creates crime. This has been observed in so many cities that it is almost flat out denial of reality to claim otherwise. It is a vicious self reinforcing circle, and the more you concentrate the failed and the miserables in one corner the worse it gets and the less chances they have to find a way out of it because the place they live in gives them hardly a chance to do so. 

Ever visited the Quartier Nord in Marseilles for example?


> You see that happening in US where the quality of your house, and its price relative to the region, is usually a very good predictor of how good public schools in an area will be since they are funded mostly out of property taxes on narrowly-defined catchment areas.


Social upwards mobility in the US is lower than in Europe according to some recent study and Europe is far less inequal. That doesn't go well with your theory. At the same time safety is more of an issue in the US than in Europe. 


> Social housing ALWAYS create dysfunction in the markets, anyway. I resort to the example of Netherlands where I live.
> On most big cities, especially Amsterdam, Utrecht and Den Haag, there is a big gap between social housing (or rent controlled) rental prices and free market prices, since the "regualted" housing stock covers 60-70% of total residences. As a result, waiting times for social housing are above 8 years for places like Amsterdam. To complicate things, Amsterdam hasn't sold land for development last 70 years (technically, all new developments are built over "perpetual leased land" from the city) and keeps a very tight grip on what is built and where.


What is the terrible dysfunction of the Viennese real estate market again? Compared to the great working examples on the British Isles for example...

If there is a big gap in the Netherlands, they don't do it right. Here there are many levels of social or subsidized housing. From as cheap as possible to above average housing for the middle class with some remaining support. There is not one big gap between terrible social housing on one side and barely affordable decent housing on the other. It also does not really take longer to get such a subsidized apartment than some privately organized one.


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## Dahlis (Aug 29, 2008)

Slartibartfas said:


> Aesthetics are great of those buildings but living conditions were bad to terrible, depending on the object. Only modern revitalization saved them and made the fit for modern use. Yes, that is often done by private actors and I have not the slightest problem with that.


Its not just aesthetics its the planning too, it creates desirable streetscapes and enviroments. No rules forcing builders to build parking spaces, no modernist mistakes with cul de sacs, no dead empty facades. Just simple town planning. And of course the buildings are modernized, thats what you do.



Slartibartfas said:


> For most inhabitants, "the highest prices" are not what they need but affordable living space with good quality of life. If the market manages to supply the people with, its fine, if not, the public hand has to act, by subsidizing or regulating certain aspects, not for the sake of it but to secure such affordable living options.


Of course high prices is not what the poor need, but the high prices is an arrow pointing in the direction of whats most desirable namely old school inner city buildings.



Slartibartfas said:


> I wonder what all those small to medium sized companies are doing then in Austria, where regulation is quite strong on these issues. Many people are constructing homes on their own behalf as well and seem to manage quite well.


I dont know how the process works in austria, how long does it take to get permission to build? are there any subsidies? etc.



Slartibartfas said:


> Sure, it should be kept as simple as possible, but also complex as necessary, to secure a certain quality standard as minimum.


Of course, but you dont need rules like the ones we have in stockholm that demand certain number of parking spaces per flat. Or that all flats should have a quiet side (outside the facade) wich makes it impossible to build in the inner city without breaking the rules and appealing to planners.


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## Dahlis (Aug 29, 2008)

Suburbanist said:


> HAving less income don't make people automatically more prone to crime.


No, but putting them all in the same bad area does.


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## geococcyx (Dec 27, 2011)

The first thought that came to my mind when I read the title: SPAIN


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## Svartmetall (Aug 5, 2007)

geococcyx said:


> The first thought that came to my mind when I read the title: SPAIN


I see you're back and already you've started to troll with responses like this... Guess you won't be back for long!


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