When you do it at the scale described, and make real estate market with large bubbles the corner stone of your economy, you get a unique situation than cannot just be explained away with "other countries do this too"

i was gonna say - a lot of places you can put a bunch of cash down for an apartment that only exists as a picture on a sign somewhere.

In the UK you can buy "off plan", but you only pay a deposit, and that goes into escrow until you get the keys, the developer can't touch the money until then

I assume it's similar in most countries

Not quite. In india properties get loans during early construction as well, and the amounts are disbursed in tranches based on completion progress. Timelines must be filed publicly with RERA and a non RERA approved property is a red flag. No escrows as such for loans taken by buyer.

What I call loan is a similar arrangement to mortgage. Buyer pledges property as collateral, pays about 20% out of pocket, rest is a debt to be paid. Defaults result in loss of ownership of property. The agreements are tripartite. Builder gets paid from the loan taken out by buyer in tranches and builder reputation matters along with market value assessment and buyer's credit profile for obtaining a loan.

Other countries have the rule of law and you can sue a developer. That’s not possible in China. I did read where disgruntled Chinese are withholding payments on these unfinished buildings. Not sure what the repercussions could be for those who do it.

Lots of people lost a lot of money on never finished apartments in my (EU) country. Suing doesn't help you when there's no money left to distribute.

Often at a significant discount over waiting for construction to complete.

Most countries haven't made it the corner stone of their economy.

You mean like a deposit, right? Not a mortgage.

In the west (at least America) that money needs to be put in escrow.

Nothing you stated in your comment contradicts the statement from CNN that you are quoting. I'm guessing this is about CNN describing to its American readers what you take as a natural harmonious fact?

I am commenting because CNN portraits this as something negative when it comes to China.

When in fact, it's fairly normal situation almost anywhere in the world.

I am in EU, own an unfinished - actually not even started yet - apartment. Can confirm, absolutely normal.

have you paid for your non-existent apartment in full already?

Sinophobic pandering is hot all over. "Nothing to miss, here" is the intent, as if it would be crippling somehow for viewers to discover that not all of the world is developing.

CNN is addressing its American audience to a practice that is not familiar in the USA. Yes, CNN is USA-centric, because...it is an American news company with a primary user base in America.

That other countries mortgage unbuilt homes is more a "what about" rather than "facts needed for reader to understand."

"American news company with a primary user base in America."

And it's infamous for misrepresenting the other parts of the world to better suit USA's interests. Cases of outright lying and negative propaganda that they know is a lie abound.

What was the lie in this case?

There was no lie here, just a fact that wasn’t disputed. If you want to complain about CNN lying, find a lie in the article rather than a fact.

You can buy a house in the US from a developer before it is built. I think maybe the difference is that if something goes wrong you have a good chance of suing the developer. That may also be the case in China. I don't know.

For US residential homes the bank has set milestones where they release funds. If the developer leaves the house half-built they only get half-paid (give or take). A similar thing applies to renovations.

Banks can and do refuse to pay until things are completed and city inspections pass the work. Could a city inspector collude with a bank and developer to rip off customers? Sure... but even if that happens it can only be small scale. The odds of the scheme collapsing increases exponentially with every additional city/bank/developer participating.

Politically China works differently. I'm sure there are plenty of developers doing good work. That clearly must be the case - not every building is a pile of garbage. But being a more centralized single-party state with state-owned banks the opportunities for shenanigans is obviously higher. It may also be driven by how much local budgets are influenced by new projects rather than ongoing property taxes. There is an incentive to approve projects and it is embarrassing to admit we should be tearing down the new building because everyone involved cut massive corners... that might also scare off new customers for the next project. Better to cover everything up and keep the scam going.

For that matter state owned banks from any country are well-known for perpetually extending loans rather than admitting the loan is garbage. This is not unique to China nor news to anyone.

You can sign a contract to buy a house from a developer before it is built. No bank will give you a mortgage before the house is built (even if they give you pre-approval), but of course you could pay in cash if you had that and wanted to (taking risk that the builder might go out of business and you will be SOL).

Since most people buy homes with mortgages, most homes in the USA aren't bought before they are built.

Most countries have laws protecting buyers. In the case of China those people are fucked. They buy off plan, the ground is never broken, the companies file bankruptcy, the buyer is on the hook for the mortgage for a property that will never exist.

There’s no personal bankruptcy in China so buyers are screwed.

But do keep trying to justify everything as “negative propaganda against China”

I think this is a key point to catch in this discussion. Like a sibling comment said, this is the way things are done in his EU country, but the big difference is that EU countries are higher-trust with way more financial regulation and accountability. China's economy is fundamentally not predicated on the rule of law and that's an important point here.

This is not true. In China, buyers have to pay the down payment and mortgage before the apartment is built, but for some reason if the builder left the apartment half built, buyers do get their money back from the bank.

No. You don’t pay off a mortgage before the home is built lol. That’s the dumbest thing I’ve ever heard.

You have to pay in full to the developer. By taking out a loan which consists of a downpayment.

The developer now has 100% of the money. And the buyer has nothing but debt.

The developers are either never breaking ground or never completing the building. Using the money to buy more land and sell more homes.

When they file for bankruptcy. The banks still need the money back from the buyer. Since the buyer has no home because it was never finished they effectively lose their investment and their lives as debt collection takes their cars, live-in home. Etc.

Stop spreading misinformation that buyers aren’t suffering. This is people’s lives at stake. Lying to people and pretending like nothing is wrong makes you a terrible human being when people’s lives are at stake.

Can you please make your substantive points without breaking the site guidelines? You broke more than one of them with this post.

I'm sure you have a good point about mortgages and developers and banks, but it's more important not to set the forum on fire, and that is what the site guidelines exist to avoid.

If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.

Nice one. Flag it and hide it so you can protect the guy defending the CCP. Nice to know HN is a propaganda forum.

You have to pay in full to the developer. By taking out a loan which consists of a downpayment. The developer now has 100% of the money. And the buyer has nothing but debt. The developers are either never breaking ground or never completing the building. Using the money to buy more land and sell more homes. When they file for bankruptcy. The banks still need the money back from the buyer. Since the buyer has no home because it was never finished they effectively lose their investment and their lives as debt collection takes their cars, live-in home. Etc. Stop spreading misinformation that buyers aren’t suffering.

But are they paying mortgages for something that doesn’t exist at all?

Are you talking about this article? (I don't see a link to CNN's article here)

https://www.cnn.com/2021/10/14/business/evergrande-china-pro...

The exact quote is:

"[Then] there is the problem of unfinished projects, even if there is demand. The majority of new properties in China — about 90% — are sold before being completed, meaning that any setbacks for home builders could directly impact buyers, according to economists."

What is the problem with the paragraph? It describes a practice that is common in China but may not be known to CNN's audience. It mentions a pitfall of the practice, which is true and has played out many times, in China and elsewhere, easily verifiable. Nowhere does it say that it's a China only problem.

In fact, read the whole article before playing the victim. Not long. You'd be hard pressed to say it's more negative that a US-related economy news piece.

Have you seen unfinished buildings of this scale anywhere else? These are just two examples from Guangzhou, one of the top cities in China.

https://www.youtube.com/watch?v=K368l0yNxvs

https://www.youtube.com/watch?v=vhv424HlkGM

It's China, you can't see anything they do in the scale they do it in anywhere else in the world. What's worse, not building enough or building too many?