There has probably never been a better time to be in
the sand business. The world uses nearly 50bn tons of sand and gravel a
year—almost twice as much as a decade ago. No other natural resource is
extracted and traded on such an epic scale, bar water.
Demand is greatest in Asia, where cities are growing
fast (sand is the biggest ingredient in cement, asphalt and glass). China got
through more cement between 2011 and 2013 than America did in the entire 20th
century. Since the 1960s Singapore—the world’s largest importer of sand—has
expanded its territory by almost a quarter, mainly by dumping it into the sea.
The OECD thinks the construction industry’s demand for sand and
gravel will double over the next 40 years. Little wonder then that the price of
sand is rocketing. In Vietnam in 2017 it quadrupled in just one year.
In the popular imagination, sand is synonymous with
limitlessness. In reality it is a scarce commodity, for which builders are now
scrabbling. Not just any old grains will do. The United Arab Emirates is
carpeted in dunes, but imports sand nonetheless because the kind buffeted by
desert winds is too fine to be made into cement. Sand shaped by water is
coarser and so binds better. Extraction from coastlines and rivers is therefore
surging. But according to the United Nations Environment Program (UNEP), Asians
are scooping up sand faster than it can naturally replenish itself. In
Indonesia some two dozen small islands have vanished since 2005. Vietnam
expects to run out of sand this year.
All this has an environmental cost. Removing sand
from riverbeds deprives fish of places to live, feed and spawn. It is thought
to have contributed to the extinction of the Yangzi river dolphin. Moreover,
according to WWF, a conservation group, as much as 90% of the
sediment that once flowed through the Mekong, Yangzi and Ganges rivers is
trapped behind dams or purloined by miners, thereby robbing their deltas both
of the nutrients that make them fecund and of the replenishment that counters
coastal erosion. As sea levels rise with climate change, saltwater is surging
up rivers in Australia, Cambodia, Sri Lanka and Vietnam, among other places,
and crop yields are falling in the areas affected. Vietnam’s agriculture ministry
has warned that seawater may travel as far as 110km up the Mekong this winter.
The last time that happened, in 2016, 1,600 square kilometers of land were
ruined, resulting in losses of $237m. Locals have already reported seeing dead
fish floating on the water.
Curbing sand-mining is difficult because so much of
it is unregulated. Only about two-fifths of the sand extracted worldwide every
year is thought to be traded legally, according to the Global Initiative
Against Transnational Organized Crime. In Shanghai miners on the Yangzi evade
the authorities by hacking transponders, which broadcast the positions of
ships, and cloning their co-ordinates. It is preferable, of course, to co-opt
officials. Ministers in several state governments in India have been accused of
abetting or protecting illegal sand-mining.
Scientists are experimenting with alternatives to
concrete and cement. Architects are trying to find ways to use such materials
more sparingly. Even the odd government is taking action. In 2018, Maharashtra
passed regulations requiring contractors to use plastic waste as filler when
building or repairing roads. Singapore is creating a new patch of land by
draining it of water rather than piling it with sand. Kiran Pereira of
SandStories.org, which promotes awareness of the issue, says “there are plenty of
solutions” if only governments would find the will to implement them. Time to
pull heads from the sand.
Half a million unfinished apartments are stuck in
financial limbo in India, dashing the dreams and the spending of a middle class
that was supposed to be spearheading India’s economic rise.
Wish Town, a development in the New Delhi suburb of
Noida, encapsulates the plight of middle-class Indians who sank their life
savings into the promise of life in a green and neatly ordered suburb. Hundreds
of empty townhouses and apartment towers, half-built and stained by mold from
monsoon rains, stare down at what used to be farm lands.
Construction stopped in 2016 when the developer
couldn’t pay its debt. Only about half of the 40,000 apartments that were to
house close to 200,000 people have been finished and handed over to their
buyers. Those who have moved in complain that the golf club, gyms, pools,
retail spaces and restaurants advertised by its developer, Jaypee Group have
largely yet to be built.
Stuck home buyers in the hundreds of “ghost towns”
now dotting the outlying areas of New Delhi, Mumbai and other urban centers
face a situation that some here liken to America’s much larger subprime crisis.
Builders have run out of money and can’t get new loans. People who put down
payments have waited through years of delays and court cases and still may not
ever get their homes or refunds.
Many have cut back spending on everything from cars
and clothes to flights and eating out. This has contributed to the recent drop
in consumption behind India’s economic slowdown, with the government predicting
growth will fall to less than 5% in the fiscal year ending March 31, its lowest
in more than 10 years. Deborah Tan, an assistant vice president at Moody’s
Investors Service, said Indian consumers have given up hoping for the economy
to turn around and are tightening their belts—one reason the rating firm
downgraded its outlook for India to negative from stable in November.
Delivering on the hopes of the middle class has
emerged as one of the biggest challenges for Prime Minister Narendra Modi. The
middle class, which most analysts say could be more than 100 million people,
has backed him strongly in two elections, and he regularly mentions the plight
of stuck home buyers in his speeches. New Delhi last month announced a $3.5
billion fund to jump start the viable projects, although many economists say
the amount isn’t enough.
The housing crisis reflects the sea change that has
taken place in India’s financial industry amid liberalization efforts to meet
the needs of a fast-growing economy. Two decades ago it was close to impossible
for most people to get a mortgage, and red-tape made it difficult and
unprofitable for developers to attempt large projects. Even the best-paid
usually had to save until near retirement before they could afford a home.
When market liberalizations in the early 2000s made
it easier to raise money on the stock market and with loans, as well as to
obtain home mortgages, buyers and builders went overboard. Across the country
there was an explosion in new apartment construction. Complexes with a total of
five million apartments and villas were launched between 2009 and 2019
according to PropEquity, a real-estate research company. Real-estate loans at
India’s banks, as well as at nonbanking finance companies known as shadow banks,
quadrupled to more than $70 billion.
The developers, though, quickly ran into problems
getting government clearances and finding enough workers to build their
projects. Apartments that were supposed to be built in three years ended up
taking five years or more. Then, funding for projects dried up, as banks and
shadow banks cut back amid growing piles of soured real-estate and
infrastructure loans. This forced more delays and even the mothballing of many
More than 450,000 apartments have been delayed for
more than three years, according to a recent government survey. The value of
all the delayed projects is more than $50 billion, 10 times the number five
years ago and still half of what it will be in the next few years, according to
Analysts say the government may need to create its
own bad bank specifically for real estate to take the bankrupt projects off the
lenders’ books. New Delhi has already merged struggling state banks into bigger
banks, while the central bank cut interest rates five times in 2019 and eased
restrictions on healthy lenders.
Samir Jasuja, founder of PropEquity, said the
industry needs government money and guarantees as well as guidelines about
which projects get saved and how. Without government-backed funds to rescue the
most viable projects, the problem will only spread, he said. “This hole is
going to get bigger and bigger and more money is going to go after bad
projects,” he said.
Builders are on track to finish more new apartments
in 2020 than in any year since the 1980s, a new study shows, with developers
across the U.S. chasing after the more affluent tenants.
An additional 371,000 new rental units are expected
to hit the U.S. market this year, which is a 50% increase over the number of
new units completed in 2019, according to an analysis from real-estate
analytics firm RealPage.
State and local governments are grappling with how to
create more rentals to combat the rising cost of housing for middle- and
lower-income families. But as much as 80% of new supply this year will come
from luxury developments, or what the real-estate industry calls “Class A”
properties, said RealPage chief economist Greg Willett.
This year’s surge signals that projects planned
around the 2015 peak of the rental market are reaching completion.
The lack of single-family houses available for sale,
and the rising price to buy them, has been one major boost to the luxury rental
market, Mr. Bahrami said.
And although rental supply this year is the highest
in more than 30 years, the construction of single-family homes for sale is well
below historic norms, sending more people in search of apartments, said Calvin
Schnure, chief economist for the National Association of Real Estate Investment
Trusts, a trade group.
Figuring out the public’s expectations of future
inflation—and trying to influence them—is core to any central banker’s work.
Yet Japan shows how hard that becomes when many people barely grasp the concept
of steadily rising prices.
“Those who were born in the 1980s and 1990s almost
have no experience of inflation. So even if they were told inflation was
coming, they didn’t believe it,” said Tsutomu Watanabe, a Tokyo University
professor and former central banker.
A 20-year-old in Japan today has
experienced average inflation of 0.1% over his or her lifetime. No wonder Bank of Japan Gov. Haruhiko Kuroda’s repeated vows to reach 2% inflation haven’t worked out.
The Federal Reserve, like the Bank of Japan, seeks 2%
inflation because it sees that level as consistent with a healthy economy. U.S.
inflation has held close to but below the target for years, and Fed officials
are reviewing their inflation targeting framework to avoid succumbing to the
low-inflation trap that has bedeviled Japan. Among the options under
consideration are approaches that would more explicitly allow or even encourage
inflation above 2% in hopes of lifting inflation expectations.
The problem, central bankers believe, is that
low-inflation expectations can be self-fulfilling if they cause consumers to
balk at higher prices and businesses to refrain from raising prices and wages.
“Inflation that runs persistently below our objective
can lead to an unhealthy dynamic in which longer-term inflation expectations
drift down, pulling actual inflation even lower,” Fed Chairman Jerome Powell
said at a Dec. 11 news conference.
In recent years, Mr. Kuroda has pointed to research
suggesting inflation expectations are adaptive: People predict future prices
based on what they have seen in recent years. In practice, that means Japanese
consumers have accustomed themselves to seeing everyday goods at low
prices and punish any retailer that tries to raise them.
Even consumers old enough to remember inflation might
not share a central banker’s 21st century perspective on it. To Messrs.
Powell and Kuroda, achieving modest, steady inflation of around 2% keeps a
nation away from a negative spiral of falling prices, declining wages and weak
demand. But to the average person, rising prices sound like a bad deal.
New York, California and Illinois have been
hemorrhaging residents. Almost 3.2 million more people left those states for
elsewhere in the U.S. than arrived from other states, from 2010 through 2019,
according to population estimates released last week by the Census
Bureau. Nine other states saw net out-migration of more than 100,000 people
over that period, but none really came close to the big three.
Thanks to 2 million more births than deaths and 1
million newcomers from other countries, California’s population still grew by
about 2 million over this period, a gain that trailed only those of Texas and
Florida. New York’s population grew but only slightly, while Illinois lost an
estimated 159,751 people between 2010 and 2019. Yes, these are all big states,
but New York and Illinois ranked second and third in net domestic migration as
percentage of 2010 population, behind only Alaska (California ranked 13th).
Where are all these people going? The
Empire Center for Public Policy, a conservative Albany think tank, put together some estimates for New York based on data that
the Internal Revenue Service gleans from tax returns… This inspired me (Justin
Fox) to do the same for California and Illinois. Here are the Empire Center’s
numbers for New York:
Domestic migration statistics are
frequently cited as evidence of the failures of blue-state
governance, in particular the higher taxes imposed by states that are losing
lots of residents. There’s something to that — income-tax-free Florida sure
is attracting a lot of affluent people from Illinois and New York, and
a recent study of high-income California taxpayers concluded that a
2012 income tax increase there did in fact drive some away.
But California, Illinois and New York have all experienced bigger per
capita personal income gains than the nation as a whole since the
beginning of 2010, and all saw taxpayers with incomes below $50,000
overrepresented among the leavers from 2011 through 2018. These departures
may indicate failures of governance as well, but it’s a different set of
governance failures, presumably related more to housing costs, commutes and job
opportunities than taxes per se.
New Jersey has seen a surge in sports bets since the
state convinced the U.S. Supreme Court to overturn a ban on such wagers in
2018. More than $4 billion in bets were placed there in 2019. But
rather than going to casinos or racetracks, gamblers are making more than 80%
of their bets online, often using smartphones near train stations just outside
New York City. They’ve made the state the early leader.