356m tall skyscraper shakes violently again on May 27th, China real estate bubble

On May 27th at about 6 p.m., the 356 meter high Shenzhen Segg Plaza shook violently yet again, marking the fifth time since May 18th that the building has shook. The magnitude of the shaking was larger this time, and clearly visible to the naked eye, gathering a large crowd of onlookers. On that day, people saw that cranes were installed on the top of Segg Plaza, and a lot of materials were piled up on the ground, which looked like they were going to be lifted onto the building. In addition, there were two people on the antenna of the building, although it's not sure whether they were performing maintenance or monitoring. The night of the 27th, monitoring personnel worked throughout the night, and even the owners of Segg Plaza were asked to go upstairs and cooperate. A netizen posted a video showing workers breaking open the interior walls to inspect the wells on the 28th. Monitoring activities continued on the 29th. Official reports said that on May 29th, the three indicators of building settlement, tilt rate, and acceleration were all above the standard code requirements. Currently, monitoring, testing, and investigation work are still ongoing. Since the initial shaking of Segg Plaza on May 18th, whenever the official daily report of the three indicators were released, it always says they're doing better than the standard code requirements. The public began to question whether the officials were purposely hiding the truth. It's very strange that the news and videos of Segg Plaza's shaking on the 27th were only released by netizens through overseas social media platforms, while the mainland media did not report on the matter at all. Not sure if the mainland media have lost interest in this topic, or if Beijing authorities have issued a directive for medias to not report on the matter. Mainland media had high-profile coverage on the matter on May 23rd, saying that a group of experts and professional institutions led by academicians were fully involved in the monitoring, testing, and analysis work. The participation of academicians suggests that the cause of shaking is complex. By the 28th, the group should have already worked for five days, yet surprisingly, no information has been released. Currently, Segg Plaza is still closed. Merchants have closed for business, and police tape has been put up all around the building. In the current debate on the cause and response of Segg Plaza's shaking incident, the price of Segg Plaza's office space has dropped significantly. Originally, with a guide price of 44,000 RMB per square meter, netizens have found a number of properties currently on KE Holdings that are being sold at more than 10,000 RMB below the listed unit price, a drop of up to 35%. The closure of Segg Plaza have triggered anxiety among the building owners, merchants, tenants, and even the people working in the building next door, since they are worried about the possibility of the 300-meter giant falling on top of them. With the fermentation of Segg Plaza's shaking incident, some people have started to reconsider China's tendency to construct super tall skyscrapers. According to statistics, China possesses 40% of the world's high-rise buildings, including 2,395 buildings above 150 meters, 823 buildings above 200 meters, and 95 buildings above 300 meters, all three numbers ranking first in the world. Li Xiaojiang, former president of the China Academy of Urban Planning and Design, believes that a multi-use skyscraper like Segg Plaza, which integrates market, office, and residential spaces with a high population density, is not conducive to responding to He also believes that high-rise buildings have many other disadvantages. In the construction stage, high-rise housing requires more consumption of building materials. In the operation and maintenance stage, elevators, insulation, and lighting consume more energy, and it is more difficult to refurbish. In the demolition stage, its cost, difficulty, and amount of waste output are also high. From the analysis of the entire building lifecycle, the financial cost of high-rise buildings is 50% to 100% higher than that of ordinary buildings. In addition, if a fire were to occur in a high-rise building, rescue operations are very difficult. Therefore, industry insiders have concluded that high-rise buildings are a waste of social resources. So why are there so many high-rise buildings constructed in China? The driving force behind it is precisely the government. The Chinese government stipulates that all land in China is owned by the state, and individuals, enterprises, social organizations, and other institutions have no ownership rights to any land, only the right to use it. The government auctions off the land use rights and receives the revenue, and the organizations, enterprises, or individuals usually acquire the land use rights by bidding, and landlots in many cities are repeatedly auctioned at a premium of over 100%. If a house is built outside of the area designated by the government, it will be labeled as an illegal building, and the government will forcibly demolish the building. In 2020, the total amount of revenue through land auctions acquired by 300 cities nationwide is about 5,982.7 billion RMB, or about 940 billion USD, 13.3% of the total income of the country's 1.4 billion people that year, and about 6% of China's GDP. The overall average price of land sold in those 300 cities was 4,909 RMB per square meter. From statistics on revenues obtained from land sales in 2020 in 44 major cities across the country, it was found that the ratio of revenue obtained from land auctions to tax-based fiscal revenue exceeded 100% in 20 cities and more than 50% in 39 cities. After land developers acquired the right to use the land, in order to reduce the cost of land per unit area, they have to build vertically and increase the number of floors as much as possible. On May 7th this year, the Hangzhou government auctioned land use rights, which was acquired by a real estate company called Binjiang Group. The company's chairman, Qi Jinxing, said the company recently acquired five plots of land in Hangzhou's centralized land auction. Under the Binjiang team's efficient management, the company's strong financing abilities, low financing costs, and brand impact, we will strive to achieve a net profit of 1-2%. Professional institutions calculated that this profit level is even lower than the income you would get through bank wealth management products. From the five plots of land that Binjiang acquired, three of them have a land cost to house pricing ratio of more than 80%. In 2020, the national average housing price was 9,980 RMB per square meter, and the per capita income was 3,653 RMB per month. This is equivalent to a person working 2.7 months to afford one square meter of house without eating or drinking, and it takes 18 years of work to afford an entire house. Chinese Premier Li Keqiang said last year that 600 million people nationwide earn less than 1,000 RMB a month. The government increases land prices, which in turn increase housing prices, resulting in most Chinese people being reduced to practically slaves in order to afford housing. At the same time, land policies are widening the gap between the rich and the poor. People at the top of society own multiple properties, and so-called ghost cities have emerged in many parts of China, where large numbers of houses are empty or unoccupied, while people at the bottom of society have no houses to live in. At the same time, real estate development remains a hot industry, causing China's real estate bubble to grow bigger and bigger. Through its land policy, the Chinese government has amassed social wealth into its own hands. At the same time, the high price of land pushes up the GDP, making the numbers look good and creating the illusion of prosperity. When the economic numbers are good, officials can label them as political achievements and increase their chances for promotion. Through this single practice, the government has achieved multiple objectives. Therefore, it's not surprising that many people refer to Chinese real estate as the number one industry in the universe. SAG Plaza is a microcosm of China's real estate industry. Then, is the shaking of SAG Plaza a sign of the dangers to come for China's real estate industry?