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Originally Posted by canucklehead2
Supply and demand. I'm sure the biggest markets are saturated with product and that there's more growth and less competition in the mid tier markets than in Beijing, Shenzhen, etc. The same reason why Ottawa, Edmonton and Calgary have seen more record breaking development than Montreal or Toronto.. Also to keep the Chinese economy afloat they need to keep building so why not...
Quote:
Originally Posted by pianowizard
Cheaper to build them there.
Quote:
Originally Posted by FrancoRey
Why is China starting to build their best towers in 2nd-tier cities? Such a waste when you have gems like Hong Kong and Shanghai begging for more vertical works.
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I don't know quite how much of this is "China" doing anything, as opposed to a coterie of individual actors (provincial governments, municipal governments, private developers, public/private firms and consortiums, etc) responding to specific national/provincial/local policies and initiatives.
The short of it is that China has a rather odd (read:
unique) land management system that essentially has meant agricultural land (which has
specific restrictions on ownership and use) near large cities has routinely been reclassified as urban (which has less -
and in recent years: no - restrictions on its use) allowing it to be developed without
a. necessarily needing to pay out compensation (because in the past, no one really could "own" agricultural land) and
b. offsetting the lost agricultural land elsewhere because, as far as records were concerned, the land was always urban (as opposed to agricultural land in rural areas, which is less fungible I'm led to believe).
Think about all the greenfield development in 1st tier cities in the early 2000s, as well as the
symbiosis of large infrastructure investments (both national and local initiatives) and accompanied developments...and then consider the
loud proclamations of moving away from "GDP as a hard growth criteria, etc etc..."
It's all connected.
In any case, curbs on some of these excesses has meant there's simply less cheap (ie. "free") land for local governments to devour (especially in the 1st tier cities), pushing up costs for potential developments and financing in these locales, which has sent that capital to 2nd and 3rd tier cities.
This dynamic tends to happen everywhere; it's why, without fail, some super ambitious development proposal in surprising locations tend to precipitate market conditions for a downturn.
It's why Beijing exercises tight capital controls, why GDP is slowly declining, and why 1st tier cities will no longer grow quite as rapidly as in the past: the latter group of municipalities has reached a rather saturated point in their economic/infrastructure development and the rest are playing catch-up.
Most local government in China rely on land development - not taxing land - for revenues, banks and firms rely on the activity resulting from rapid land development to outgrow debt obligations...and so the wheel turns.
In any case, this is my - broad strokes - understanding from casual observation over the last 10 years or so. It isn't really anything majorly concerning (for now; one would be rather alarmed if banks - and firms/local governments - started to see a sharp increase in non-performing loans and resulting defaults/credit tightening, which is the main preoccupation of national policies*) other than the property market in China simply coming down from a major high.
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And is why, for whatever reason, the current US administration is convinced tariffs are a sufficient way to apply leverage in negotiations as opposed to pushing for Beijing to ease restrictions on capital outflows...but I digress.
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