These Fake Islands Could Spell Real Economic Trouble
Glamorous property projects and financial crises tend to go hand-in-hand. And where else have we seen glittering properties like Melaka Gateway or Forest City before? Where have we seen stretches of newly packed white sand, dotted with villas, palm trees, high-end retail malls, marinas, and office towers?
Is it Dubai’s WorldorPalm Jebel Ali developments? A decade later, both projects are all but deserted ever since the 2008 financial crisis which saw the dreams of dreams of creating exclusive, private-island enclaves for the like of the Beckham’s and Michael Schumacher come crashing down. Both sit all but deserted a decade after the 2008 financial crisis crashed their dreams of creating exclusive, private-island enclaves for the likes of Michael Schumacher and David and Victoria Beckham. Or maybe it’s the Bridge of the Horns project that unconvincingly promised to erect megacities on different sides of the war-torn, pirate-infested Bab el-Mandeb straits?
However, Melaka Gateway’s port and industrial park carry traces of Kansai International Airport, the Renzo Piano-designed terminal on an artificial island in Osaka Bay. The construction spanned the rise and fall of Japan’s 1980s boom. The project still has an 848 billion yen ($7.6 billion) of net debt attached it to three decades later.
Similarly, in July 1998, Jiang Zemin opened Hong Kong’s international airport on reclaimed land. At the time, the territory’s economy was shrinking by 8.3%, which was why the government suspended land sales to propel real estate prices and prevent a banking crisis.
In case you’ve not quite gotten the point, there seems to be some sort of correlation between the created of artificial islands filled with fancy real estates and an economy that’s on the verge of collapse.
This should be a worrying discovery for Country Garden Holdings Co., Forest City’s developer; Power Construction Corp. of China and KAJ Development Sdn. Bhd., which are working on Melaka Gateway; plus the group that intends to build an artificial island housing 1.1 million people on the other end of Hong Kong’s Lantau Island from the airport.
There’s a parallel to this construction/economy collapse. Property analyst, Andrew Lawrence developed the Skyscraper Index in 1999, which theorizes that there’s a link between economies that are near collapse and record-breaking tall towers. This pattern can be observed in several places, like in Manhattan, where the Singer Building and the Met Life Tower began construction on the eve of the Panic of 1907. Twenty years later, the Empire State Building and the Chrysler Building were at different stages of construction in October 1929, the month of the famous Wall Street Crash.
Construction of the Willis Tower and World Trade Centre also saw the 1973 oil shock start, while Kuala Lumpur’s Petronas Towers corresponded with the 1998 Asian financial crisis. New York’s One World Trade Centre, Dubai’s Burj Khalifa, London’s Shard, and 432 Park Avenue were allbeing developed when the 2008 global crisis hit.
The reasons for the two patterns aren’t so farfetched. Paving over the ocean and building record-breaking towers is something that happens only when the price of land has gotten so out of hand that it is no longer viable to develop real estate the traditional way. These rising land prices, in turn, are as a result of credit running so freely that an economic crunch is almost certain to be around the corner. .