Not so great if large aspects of your economic growth is tied to the real estate market. Theoretically the value of property is tied in some way to scarcity. If there is an abundance of housing, then there’s not a real reason for property value to mature.
If the rate of maturity is less than the rate of this inflation, then you are no longer creating an investment, you are creating debt. If a property investment group, a private bank, or state bank has over invested too heavily in developing the real estate market… there’s a pretty good chance that it’s going to have a hard time remaining in solvency.
This is an example of why a lot of people accuse the CCP of giving up on communism after the Deng reforms. Satiating the needs of the market too often conflicts with the needs of the people.
Theoretically in a planned economy you would be correct. There’s no motivation too build too many homes, nor is there is there a scarcity of homes. Both scenario are conditions of a capitalist market reacting to the perceived needs of the consumer or the market.
Real estate speculators make too many buildings, property values fall, people can buy homes, and everyone wins. Right? Oh, except for real estate speculators, but who cares about them anyway.
In a planned economy, it wouldn’t be unexpected to over-build. In fact, it perfectly makes sense, same as we would over produce a small surplus of anything. Housing isn’t ten I to create, and so having reserves ready for use when they’re needed in the future is a good thing. It may be bad from capitalism perspective, because you aren’t getting a great return on the investment yet. But from a planned economy perspective it’s good.
In a planned economy, it wouldn’t be unexpected to over-build. In fact
I wouldn’t call that over building though, and that wouldn’t explain hundreds of millions of extra homes. Building that aren’t being used begin to break down quite rapidly.
That’s a good thing, right? It means there is no homelessness in the entire country, right?
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Correct
Not so great if large aspects of your economic growth is tied to the real estate market. Theoretically the value of property is tied in some way to scarcity. If there is an abundance of housing, then there’s not a real reason for property value to mature.
If the rate of maturity is less than the rate of this inflation, then you are no longer creating an investment, you are creating debt. If a property investment group, a private bank, or state bank has over invested too heavily in developing the real estate market… there’s a pretty good chance that it’s going to have a hard time remaining in solvency.
This is an example of why a lot of people accuse the CCP of giving up on communism after the Deng reforms. Satiating the needs of the market too often conflicts with the needs of the people.
Theoretically in a planned economy you would be correct. There’s no motivation too build too many homes, nor is there is there a scarcity of homes. Both scenario are conditions of a capitalist market reacting to the perceived needs of the consumer or the market.
Real estate speculators make too many buildings, property values fall, people can buy homes, and everyone wins. Right? Oh, except for real estate speculators, but who cares about them anyway.
In a planned economy, it wouldn’t be unexpected to over-build. In fact, it perfectly makes sense, same as we would over produce a small surplus of anything. Housing isn’t ten I to create, and so having reserves ready for use when they’re needed in the future is a good thing. It may be bad from capitalism perspective, because you aren’t getting a great return on the investment yet. But from a planned economy perspective it’s good.
I wouldn’t call that over building though, and that wouldn’t explain hundreds of millions of extra homes. Building that aren’t being used begin to break down quite rapidly.