China Soaring Skyscrapers Latest Confirmation Of Housing Bubble, Barclays Finds
There has been an unhealthy correlation between construction of the next world's tallest building and an impending financial crisis over time. Barclays Capital points to their Skyscraper Index and the developments in New York 1930, Chicago 1974, Kuala Lumpur 1997, and Dubai 2010 but as they note "the world's tallest building is often simply the edifice of a broader skyscraper building boom, reflecting a widespread mis-allocation of capital and an impending correction." Incredibly, China has 53% of all the world's skyscrapers under construction (today's biggest bubble builder) and will expand the total number of skyscrapers by 87% by 2017. China is not alone as another hopeful driver of global growth, India, is ramping up its skyscraper development and now has 14 under construction (and is constructing the world's second tallest building, the Tower of India, which should be completed by 2016. As BARCAP concludes, if history is any guide, this building boom (and increasing geographic dispersion) in China (and India) is simply a reflection of massive mis-allocation of capital, which may result in an economic correction for two of Asia's largest economies in the next five years.
Barclays Capital: The Skyscraper Index - Bubble Building
As the Skyscraper Index (first published in 1999) shows, the link between construction of the world's tallest building and an economic crisis has proved remarkably accurate. It may have started with the Tower of Babel, but over the past 140 years an unhealthy correlation exists between the building of world's the next tallest building and an impending financial crisis: New York 1930, Chicago 1974, Kuala Lumpur 1997, Dubai 2010.
Skyscraper construction has been characterised by long periods of inactivity intersected by short periods of erratically timed, intense activity typically coinciding with excessive monetary expansion in the global economy. Skyscrapers are perhaps the ultimate architecture of capitalism.
The world's first skyscraper, The Equitable Life Building in New York was completed in 1873 at a height to its roof of 142ft. Later demolished in 1912, this first skyscraper coincided with a five-year recession in the US and Europe that started in 1873 and is now known as the Long Depression.
The Auditorium Building in Chicago completed in 1889 and the New York World Building, New York, completed in 1890, coincided with the British banking crisis of 1890 and a world recession. The Masonic Temple in Chicago, completed in 1892, The Manhattan Life Insurance Building in 1894 and Milwaukee City Hall, completed in 1895, all coincided with the US panic of 1893 marked by the collapse of railroad overbuilding, a series of bank failures and a run on gold. Until the Great Depression of the 1930s this was considered the worst depression the United States had ever experienced.
The completion of the Park Row Building, New York in 1899 and Philadelphia City Hall in 1901 foretold the US stock market crash and panic of 1901.
The construction of the Singer Building, completed in 1908, and the Metropolitan Life building, completed in 1909, both in New York, coincided with an economic crisis in the United States which commenced in October 1907 reflecting a monetary expansion brought about by the establishment of trust companies. The Woolworth Building, New York, that opened on 24 April 1913 coincided with the 1Q13 peaking of the US economy and a fall in GDP that lasted until 4Q14.
The Great Depression, marking the end of the extended post-World War I boom, was matched by three record breaking New York skyscrapers: 40 Wall Street in 1929; The Chrysler Building in 1930 and the Empire State Building in 1931.
The completion of One World Trade Centre, New York in 1972, Two World Trade Centre, New York in 1973 and The Sears Tower, Chicago in 1974 marked a period of US currency speculation, the collapse of the Bretton Woods system and the OPEC price rises which caused an economic crisis across the world.
Perhaps unsurprisingly, the first of the world's tallest buildings in the last 130 years to be built outside the US heralded its own regional crisis. The completion of Petronas Towers, Kuala Lumpur in 1997 was followed by a region-wide economic crisis and the collapse of Asian currencies. Likewise in technology-centric Taiwan, Taipei 101, although completed in 2004, start of construction in 1999 was well timed to coincide with the early 2000s recession and the end of the technology bubble.
The 2010 completion of the current tallest building in the world, the Burj Khalifa (previously called the Burj Dubai), has coincided with the current global financial crisis, especially when it is considered that the building's height overtook that of Taipei 101's on 21 July 2007. It is estimated to have cost the developer, Emaar, around US$4.1bn to build.
Thankfully for the world economy, there is not currently a skyscraper under construction that is planned to overtake the height of the Burj Khalifa. This is perhaps unsurprising given the significant increase in building height of the Burj Khalifa over the previous world's tallest building, an increase in height comparable to that created by the 1930s skyscrapers over their predecessors. All of which suggests that not only may completion of the world's tallest building be a good indicator of economic excess, but the rate of increase in height may also reflect the extent of that economic excess.
Bubble Building
Yet, while completion of the world's tallest building might symbolise the extent of economic expansion and the height of hubris, in terms of economic outlook it is important to also focus on the number of skyscrapers being built. An analysis of the construction of skyscrapers shows a clear concentration of building booms of geographic concentration; the world's tallest buildings rarely stand alone.
Based upon Skyscraper completion dates the chart below shows the US building booms of the 1890s, the 1930s and 1970s that corresponded with the completion of their record holding buildings. However, it also shows the late 1980s building boom associated with the US Savings and Loan Crisis and a recent building boom that corresponds with the current financial crisis.
The growth of Asia ex-Japan construction in the 1990s is consistent with the region's completion of the world's tallest buildings and the onset of the Asian financial crisis. More recently, it has been the Middle East, which now has the world's tallest building, where the recent concentration of skyscraper building has emerged.
Looking forward, using skyscrapers under construction, it is evident that the skyscraper boom in China continues to grow. China will complete 53% of the 124 skyscrapers under construction over the next six years, expanding the number of skyscrapers in Chinese cities by a staggering 87%. China's skyscrapers are not only increasing in number — it now has 75 completed skyscrapers above 240m in height - but the average height of the skyscrapers that it is building is also increasing as past liquidity fuels the construction boom.
In addition, to the increase in size and number of China's skyscrapers, their geographic profile is also changing. Today over 70% of China's skyscrapers are unsurprisingly clustered in the more economically advanced coastal areas of the Pearl River Delta and the Yangtze River Delta. Yet between now and 2017 over 50% of China's skyscrapers will be built inland as China's building boom moves from first-tier cities to second- and third-tier cities. Over 50% of China's skyscrapers are today in tier 1 cities, and based upon current completion plans about 80% of China's new skyscrapers will be built in tier 2 and 3 cities over the next six years - evidence of the expanding building bubble.
Yet China is not alone in the growth of its building bubble, India it seems is playing catch¬up. Today India has only two of the world's 276 skyscrapers over 240m in height, yet over the next five years it intends to complete 14 new skyscrapers, in what will prove to be its largest skyscraper building boom. Worryingly as well, India is also constructing the second tallest building in the world, the Tower of India, which should complete by 2016.
The writing, so to speak, would seem to be already on the glass curtain walling. For if history proves to be right, this building boom in China and India could simply be a reflection of a misallocation of capital, which may result in an economic correction for two of Asia's largest economies in the next five years.
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WInning!!! What happens to a market that is down on a morning like this when China's landing is hard as hell.
It gets better by the day!
-John
http://motors.shop.ebay.com/carmarketer78/m.html?item=190626164170&cmd=ViewItem&sspagename=STRK%3AMESELX%3AIT&_trksid=p3984.m1555.l2649&_trksid=p4340.l2562
Now the question is, how can an individual investor get a short side exposure to China and India? :)
I haven't posted on here in awhile even though I follow zerohedge all day everyday, but this was front page yahoo news yesterday. I thought zerohedge was out in front, is Tyler getting beaten now by Yahoo?
Perish the thought...
http://www.dailymail.co.uk/news/article-2005231/Chinas-ghost-towns-New-s...
Skyscraper forest bubble?
If anyone can tell me what "work" gets done in these skyscrapers other than shifting fiat money around, I'm all ears.
I can tell You :)
- cleaning
- blow-jobs
- security guards
- others not listed
excuse my eng
what a great sight it will be one day in India seeing thousands of pick pocket kids circulating through the lunch crowds outside all the new skyscrapers
-it's the kind of oxymoron that warms the heart
Dao Xiaoping made a Faustian deal with the capitalists to modernize China at any cost. But he overlooked the futural ethos of such a place-time. A modern China with huge income disparities, pollution, and the trend to dehumanize labour into disposable widgets.
Dao Xioping's mission statement for China could be summed up as, 'If you build it the future will come." The future has arrived. And it is as empty as the millions of sq ft of commercial real estate.
What is happening @ foxconn is heartbreaking:
You work 80 hr weeks at 14, inhale neurotoxins, and get fired by 23, because your hands tremble, and are unable to meet the production quotas.
http://www.thisamericanlife.org/radio-archives/episode/454/mr-daisey-and...
please get Deng Xiaoping's name right before you talk about his Faustian deal or futural ethos
Newsflash: there are more than 1 way to transliterate Chinese into English
Now back to the regular programming
My friend is convinced that the reason why China builds all of those empty cities and empty malls, is to have places ready to move to if they have to evaquate entire urban areas quikly; Fukushima like.
Suppose they Haarp down one costal city, it will be useful to have an entire ciy already built to move the survivers to.
I would consider this a misallocation of capital! Once China's economy finaly starts feeling some realistic feedback it will sink like a golden zeppelin
Bahamas,
If such foresight is being performed, surely they are preparing also for the Oceans rise to accelerate. As it already has begun.
Correlation does not imply causation
case closed.. junk
alx
In some cases it does, so not junk.
I don't think they were trying to link correlation to causation, but rather, point out a useful correlation. These types of insights are interesting for what they foretell, without requiring causation.
Unless man consider most skyscrapers are useless and as such represent the tip of the iceberg of capital miss-allocation. Hence there might be implicit causation here.
Just another "Granfalloon"
Well, the great wall is crumbling for heaven's sake.
What other symbolic confirmation do we need of china's shambolic condition.
Humpty Dumpty USTy.
ori
/oil-crisis-in-a-thousand-words/or less
The bigger the skyscrapers, the smaller the.............well, you know. :)
Just like the missles
Haaaha! Great 1-2 up there..... :-)
ori
I have always found it 'instructive' when thinking about the escalating madness to consider how Viagra came along just about the same time the financial insanity control rods were pulled and the whole shooting match went thermonuclear.
Indeed CD. Sales for the blue pills and it's derivatives are highest in Kashmir, Iraq, Afghanistan (per capita). Probably Libya soon.
Volume king of course is the US of A. And it was really cynical of them to use General Orange Juice, with his withered arm as their Stand Up Guy!
ori
The real houses of fiat? The action today makes no sense, from either a technical perspective or a fully manipulated one. Gold starting to shine again.
Image by Oscar Oiwa
"Nevermore!"
A stately raven
Thy crest not shorn
Thou art no craven
From night's plutonian shore...
Mister CROW - good one!
On the topic of China's building bubble check this story out;
http://www.dailymail.co.uk/news/article-2005231/Chinas-ghost-towns-New-s...
They have built complete SKYSCRAPER CITIES with no apparent occupants!
Now THAT is a building bubble...
At least for China, when this so called hard landing happens... the buildings they built will still be standing. The high speed rails they built will still be running. The dams they built will still be producing electricity.
What about the US? What's backing the bond that was used to fund the 45 million on food stamps? (think about that for a second) What's backing the bond that was used to pay for the air conditioning in the embassy in Iraq? ..some $20 billion a year.
Sorry but I can't tell whether you're joking or not.
Correction: The high speed rails they built will still be crashing.
The idea to look at skyscrapers as an indicator of easy monetary conditions and capital misallocation has been promoted by Mark Thornton a few years ago. Check his work if you are interested in more details, especially in the theoretical foundation of this relationship!
There have been some socionomic (Elliott Wave) studies on this, as well.
Now if they just had something to put in all them skyscrapers. I don't know why thy feel the need for more office space when you can do most anything sitting at a local Starbucks.
Skyscrapers are the homes of bureaucrats, administrators, media tycoons, tax accountants, Fortune 100 CEOs, financial houses etc. This lead a friend of mine to ask the following question:
Any answers?
Less urban sprawl? (more land preserved for agriculture)
Engineering advances generally applicable across other activities?
Picturesque views?
Cool climbing and base jumping videos?
Peaceful and constructive international competition?
Eventually sustainable aquaponics and solar energy generation? ( http://thefuturist.co/skyscraper-farms-%E2%80%93-feeding-the-world )
"Eventually sustainable aquaponics and solar energy generation? ( http://thefuturist.co/skyscraper-farms-%E2%80%93-feeding-the-world )"
Did you ever look at a solar farm ? Would you stack the solar cells on towers if you had to build one ?
Basic reason why above link is just plain totally mathematically unsound stupidity.
The fact is that skyscrapers being good shapes to increase density at the scale of a city is a total false myth (not even talking energy required to run them).
See below linked 2 pdfs for details :
http://iiscn.wordpress.com/2011/05/15/densite-etages-lumiere/
Winston Churchill, visiting New York, was awakened the day after Black Tuesday by the noise of a crowd outside the Savoy-Plaza Hotel. "Under my very window a gentleman cast himself down fifteen storeys and was dashed to pieces, causing a wild commotion and the arrival of the fire brigade,"
So am I to interpret your historical quote as implying that you believe that the best thing that ever came out of a high-rise was a banker at high speed on a trajectory for the street?
"Tower of Babel": Ancient capital mis-allocation of Biblical proportion ? ;)
Hmmm....The Tower of Babel. Well, it's hard to NOT see the prophesy here!
The Tower of Babel did not work out so well either.
About skyscrapers, one shouldn't forget a very important thing : The constantly rehashed "fact" that skyscrapers are "good generic shapes" to increase density at the scale of a city is simply a false myth, that is a lie (and especially true for housing, less for offices).
This was "formalized"(even if in a too simplified way at the time, basic results still stand) in the sixities by Leslie Martin and Lionel March in Cambridge, that is if you compare generic urbanism made of towers, slabs or courtyard buildings, using the same natural light constraints and with varying number of floors, it is false that the tower shape provides the best results, and all this is asymptotic anyway.
Or in other words, skyscrapers only "make sense" as a singularity, and the "increasing density mantra, the higher the better" is simply a "false moral excuse" in order to build them.
So wouldn't be surprised at all of this synchronicity between building some and financial crisis.
for details check two articles linked below(in english as pdf):
http://iiscn.wordpress.com/2011/05/15/densite-etages-lumiere/
(especially second one section 2 and 3)
Wow, thanks for sharing that link. Very interesting.
Yes, more or less "rediscovered" this thing after asking myself the question, and finding almost nothing on the web about it, then finally found March and Martin work (through one of Christopher Alexander's books in fact), but really surprising that this isn't more known !
And also that not more research has been done about it, especially considering today's computing power...
This truly is one of these "false myth" we must get out of, especially considering the current energy "landscape" ...
And a little cartoon :
http://iiscn.wordpress.com/2012/01/02/vestale-sous-contraintes-exercice-...
x
Within Silicon Valley you used to be able to pretty well predict that a given company had peaked out when they built their grand new world headquarters....it was a slam dump to go short when they broke ground.....Borland was one fine example of this....every day their corporate edifice rose, their stock price declined...there are many other examples.
So, perhaps this building barometer works on both a macro and micro level?
Also noteworthy is the correlation between a company getting a stadium named for it and a decline thereafter in its stock price.
Perhaps this bears out "Pride goeth before a fall"??
Skyscrapers are a monumental misallocation of capital? Everything under the sun in our current paradigm is a massive misallocation of capital. Please folks... I implore you to watch the financial part of Zeitgeist Moving Forward which runs from 0:42:30 to 1:22:46 - http://www.youtube.com/watch?v=4Z9WVZddH9w
Burj Dubai is the height of architecture – just don't look down
http://static.guim.co.uk/sys-images/Arts/Arts_/Pictures/2010/1/4/1262623...
http://www.guardian.co.uk/artanddesign/2010/jan/04/burj-dubai-height-arc...
Cheaply built sky scrapers...
http://4.bp.blogspot.com/-TC75qE4eFuw/TaByXYzA1GI/AAAAAAAAUG4/mK9o46VhfE...
The US puts up 15 of 18 from 1873 to 1974 - has a great run. China/Dubia/India put up one or two - impending crisis!!
Wow, all sorts of bankers are experts on China's housing bubble and collapse
... but NONE OF THEM COULD POSSIBLY HAVE SEEN AMERICA'S HOUSING BUBBLE AND COLLAPSE
... and I really doubt China's bankers are doing anything like MERS, they'd probably be shot if they tried it.
The full paper's here:
http://www.scribd.com/doc/77975907/Skyscraper-Index-Bubble-Building-1
(But there's not much more in it.)
Few Chinese buildings above 20 floors have enough lifts BTW. Real PIA.
What about all the other skyscrapers that were built and not immediately followed by a financial shitstorm? If Barclays, or anyone else for that matter is using such information then they are even more incompetent than previously thought. The cunts can't even pay a fucking check in properly. What next? Tea leaves? Arseholes.
KINGDOM TOWER.
There were many reasons for the Decay and Fall of the Roman Empire...political, social, economic and intellectual.
"this building boom (and increasing geographic dispersion) in China (and India) is simply a reflection of massive mis-allocation of capital, which may result in an economic correction for two of Asia's largest economies in the next five years."
Nelson - Ha ha.
This (jpg) is a better building chart!
So ... if the US's banker, China, is having financial issues with tall buildings why is it (or is it not?) loaning money to the US to build a replacement "target" building where the towers stood?
The taller they be, the easier they be to hit with Dov's robo flight machines manned by non existent Central Insurrection Agency sock puppets!
You Be looking in the wrong place for real estate income - insure them against Cap`n Tom's Sky Terror Warriors and get a sure thing 3571% return. And one should never ignore all the counterfeit funding they'll produce for the Forever Wars, when they implode at free fall speed into their own foot print!
BDIY back at 1053 - lowest level since Feb 2011 and close to Oct 2008 levels.
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND