
A Fifth of China’s Homes Are Empty (2018) - paulpauper
https://www.bloomberg.com/news/articles/2018-11-08/a-fifth-of-china-s-homes-are-empty-that-s-50-million-apartments
======
ksec
To put things into context.

1\. These are Urban Homes.

2\. There are roughly 20M people jumping to new cities and Urban areas every
year. For years China has keep a roughly two years buffer zone, I think the
rate of new housing is the same and rate of people going into Urban has
declined, so a slight increase in terms of buffer ( closer to three years now
).

3\. Most of the "Ghost Cities" do get fill up quickly, once the policy are in
place for their turn.

These so called Home vacancies and ticking time bomb has been cycling through
media every year. And it isn't happening ( yet ). There are 500M+ still living
in rural areas ( Yes I know the number is a little hard to believe ) At least
another 300M to go from rural areas to Urban, with 200M likely not going to
get their turn as they age.

So from that perspective ( As much as I hate to admit it ) China really is
still a _developing_ country.

~~~
spyckie2
Articles about ghost cities are a fascinating read - sometimes exploring un-
intuitive facts, like having 50m empty homes in China, yields a surprising
discovery of the underlying systems.

In this case, I think the system perfectly justifies having 50m homes empty.
If you look at it another way, if San Francisco (arguably another booming
localized economy) had the same initiative to build a 20% buffer for housing,
it would be seen as a progressive, citizen minded effort to create affordable
housing and a huge benefit to the community.

As China, I'd much rather face the problem of building empty homes (which is
not really a problem?) than face the population revolting from huge spikes in
cost of living due to not enough urban housing. SF is full of rich enough
people to ignore the struggles of the working class - China probably isn't.

edit: I also don't think the rise in 2nd or 3rd home purchases is an issue,
it's more of a symptom of the growing divide between rich and poor, especially
in China.

~~~
pascalxus
SF residents are nowhere near rich enough to afford the struggles. Even people
in the top 2-5% struggle desperately to afford housing, renting out every
bedroom in the house just to afford to stay there.

~~~
BurningFrog
SF residents are among the richest in the world.

SF housing is made _extremely_ expensive by multi decade long anti housing
policies, but that's completely artificial.

If the Chinese ran housing in SF, there would be housing for 5 million people
there.

~~~
masonic

      If the Chinese ran housing in SF, there would be housing for 5 million people there
    

...and enough water for about 900,000 of them.

~~~
BurningFrog
Pretty sure there would be water.

Pretty sure not everyone would like how.

------
setgree
In 2012, I traveled for about 6 weeks in China. I saw a lot of large cities --
not the megalopolises of Beijing and Shanghai but Guangzhou, Xi'an, Kunming --
with unreal amounts of what looked like high-end real estate going up. if you
moved to the countryside, things got a lot poorer, so there was a pretty clear
disconnect.

But the weirder thing was endlessly empty malls. For whatever reason, high-end
luxury malls had all been built _before_ the in-progress housing stock, and
they had already found tenants who were stores way out of my (comparatively
wealthy!) price range: gucci, prada, etc.

So it seemed like the plan was to move a lot of people from the country to the
city and provide them with high-end malls to shop at. But the problem was that
those people were poor. It struck me as unlikely that they'd be rich enough to
buy Fendi bags by the time they moved in. And the malls were standing dead
empty until that happened.

None of this made any sense, and it was happening on an absurdly huge scale.
(I can't remember where I read this, but I like the line that went like:
"There is no precedent for how big things are in China, because there's never
been anything as big as China.")

This seemed like a phenomenal misallocation of resources, so it was -- and is
-- very hard to believe that a country making such crazy decisions was
actually going to become wealthy and stable.

So pretty much everything I read about China's economic development, I don't
believe. It all seems like a house of cards. Articles like this one, however,
are much easier to grok.

~~~
lazypenguin
I found a similar reality in other developing countries. 1 hour outside of
Dubai you can find giant luxury apartment blocks & chalet communities with 50%
occupancy of basically only foreigners. A nearby deserted mall that is stock
full of the top brands of everything and anything at top-dollar (literally)
but just outside the "locals" live in abject poverty and work in the 50C sun.
I have also seen in it Uzbekistan where a newly invigorated government rushes
to throw up skyscrapers and luxury apartment complexes that nobody can afford
while the local populations still lives in soul-crushing conditions.

My theory is that many developing countries use the wrong metric to gauge
their success, looking to count their skyscrapers or their advanced techno-
cities but fail to see that the success of "developed" countries lies more in
their justice and governance systems.

~~~
pasta
China is not a developing country. I don't know where you got that idea.

China is the second-largest economy.

~~~
hylaride
Yes, it's the 2nd largest economy because it's got over a billion people. Per
capita GDP is about 1/5 of the US. But that's not evenly split. Leave the east
coast of china, and it gets poorer fast.

------
50656E6973
For context, it's been estimated that there are around 18M vacant homes in the
US, though it's difficult to find a reliable source for this information.

[https://www.google.com/search?q=how+many+vacant+homes+are+th...](https://www.google.com/search?q=how+many+vacant+homes+are+there+in+the+US)

~~~
eej71
Seems high in the context of a total of ~112M homes. That would be more than 1
in 10 homes which I find hard to believe.

[https://www.statista.com/statistics/183635/number-of-
househo...](https://www.statista.com/statistics/183635/number-of-households-
in-the-us/)

~~~
conistonwater
I think it should be 17M (12%), I tried plotting it in FRED:
[https://fred.stlouisfed.org/graph/?g=mGVF](https://fred.stlouisfed.org/graph/?g=mGVF)
(the numbers themselves from the US Bureau of Census) The highest the US has
gone recently is 15% vacant housing units, and it's been going down since the
Great Recession. I think one reason why 12% is not so unbelievable is that if
people move reasonably often, and it takes a certain amount of time to find a
new tenant, then part of the vacancy rate will be proportional to the rate of
churn of people moving in/out. For a single landlord, a 12% vacancy rate is
about 1.5 months of rent missing per year, which is high but not hard to
imagine.

Looking at that plot, it does seem like the vacancy rate correlates with
housing bubbles quite well.

------
hodder
While problematic in the short term, the scale of urbanization and decreasing
domicile density alongside rising GDP/capita will allow China to eat through
the slack inventory in the coming years. They are adding about 1 NY
metropolitan area worth of urban dwellers per yr:

[https://www.statista.com/statistics/278566/urban-and-
rural-p...](https://www.statista.com/statistics/278566/urban-and-rural-
population-of-china/)

    
    
        Urban region Rural regions
    

2017 813.47 576.61

2016 792.98 589.73

2015 771.16 603.46

2014 749.16 618.66

2013 731.11 629.61

2012 711.82 642.22

2011 690.79 656.56

2010 669.78 671.13

2009 645.12 689.38

2008 624.03 703.99

~~~
droopyEyelids
Dont forget there are nearly a billion people who will have to migrate out of
low-lying areas on the east of India/bangladesh over the next few decades as
sea levels continue to rise.

China is wise to have extra housing capacity. Even if they are 'nail houses'
... they only have to beat sleeping in the streets.

~~~
jonathankoren
It’s unclear to me why Bangladeshis would migrate to China as opposed to India
or Pakistan.

~~~
imtringued
Probably because china has 50 million empty apartments. 3 People per apartment
should be enough to let all of Bangladesh escape (they'll need it).

~~~
jonathankoren
Countries aren't fungible commodities.

The problem isn't if there's a spare bedroom, it's the political, social, and
economic forces. And since we're talking about mass migration, we also have to
talk about geography.

Think about it. In order to get to China, you have to cross the Himalayas,
probably on foot. Then once you're there, you have to enter an economy
(perhaps clandestinely) where you can't speak the language, have no large
population of people that speak your language, have no common social ties, and
if that wasn't enough challenges, the country is famous for clamping down hard
on _internal_ economic migration (i.e. the hukou system), and has no history
of foreign immigration since... ever?

It's just not plausible. You can walk to India. You can walk to Pakistan.
There are cultural ties to Pakistan. If you want to go someplace outside of
South Asia, Kuwait and the other Gulf States have extensive Bangladeshi expat
communities, due to the number of migrants workers. (Hell, 70% of Kuwait's
population isn't Kuwaiti[0].)

[0]
[https://en.wikipedia.org/wiki/Demographics_of_Kuwait](https://en.wikipedia.org/wiki/Demographics_of_Kuwait)

------
politician
I guess what's surprising to me here is that in a nation of 1.5B people, they
only have 250M homes.

~~~
joe_the_user
That surprised me also but that is 6 people per home. Considering the
institution of the extended family is probably not completely dead, that
doesn't seem altogether implausible.

Edit: Given this - it seems like China might be able to more easily absorb
this many apartments being put on the market. One could imagine a lot of
people entering a modern world where they wouldn't live with their parents (or
child).

~~~
hyperpallium
One child policy since 1979 [https://wikipedia.org/wiki/One-
child_policy](https://wikipedia.org/wiki/One-child_policy)

~~~
solveit
Yes, but an extended family spans multiple generations. You can easily get
over ten people even if the last generation consists of one person per pair of
parents.

Still, I'm sure there's a bunch of people that only live together on paper, or
multiple families that share a house because they're poor, and the like.

------
annefauvre
A lot of $$$ was stored away in housing assets in China. When I was in
Chongqing in 2014 it was clear -- building for building's sake with the
expectation that these empty properties would ultimately accrue in value and
demand would exist at some point...

I think much of this open housing is in new urban cities -- the 10M person
cities that are mostly west and on the Silk Road built to support trade (but
not quite built because of actual need just yet)

~~~
NicoJuicy
I don't think so, according to what I read/learned it had to do with defaulted
loans.

In a "us knows us" world, the big loans are given to people approving the
regime.

The loan is 10 million for example, the collateral is the property.

The loan is 50% used and defaults.

5 million profit.

Some articles around shadow banking, if you want to look it up

~~~
annefauvre
Yeah that's interesting. What I've also read is that property was one of the
only private assets not taxed at the same rate in China so is a good place to
store capital (or that was the expectation). Secondly, a huge initiative of
the Chinese Government beginning in 2008 was to "go west" and they started
providing a significant amount of funding for major infrastructure and
development projects with the "if you build it they will come" mentality.
Still possible that type of migration west could happen -- particularly as
China expands trade relationships with the countries to their west as well...

~~~
ThrustVectoring
The explanation I heard was more about capital controls. A fairly well-off
middle class Chinese citizen cannot plan for retirement by buying into an S&P
500 fund and waiting three decades. Chinese bonds have negative real rates.
And the fate of the stock prices of domestic Chinese companies are subject to
the vagarities of the shifting whims of the Chinese government. Where else are
they going to put their money? An apartment that sits there empty for two
decades and then gets sold looks _quite_ attractive in that context.

------
Animats
The actual study would be more useful. Bloomberg gives us no idea where the
vacant homes are. From the article: "China's vacant properties include empty
homes of migrants seeking work elsewhere." China's hukou system[1] limits
where Chinese can live and work within China, and what benefits, like
schooling for their kids and medical care, they are eligible for. The other
side of that is that with a rural hukou, someone who can't make it in the big
city can go back to their village and have a peasant-level job and a place to
live. So some people want to keep their right to go home again, and their
village residence may be vacant some or all of the time.

There's nothing wrong with housing not being a scarce resource.

[1]
[https://en.wikipedia.org/wiki/Hukou_system](https://en.wikipedia.org/wiki/Hukou_system)

------
maxander
No mention of the “ghost city” effect? [0] A good hypothesis for why there’s
so much unoccupied housing is that it’s all in regions where the demand is
slim, that were nonetheless highly developed due to various political factors.

[0] [https://en.m.wikipedia.org/wiki/Under-
occupied_developments_...](https://en.m.wikipedia.org/wiki/Under-
occupied_developments_in_China)

------
itchyjunk
I watched a really nice 12 mins video[0] on this topic only yesterday. I
haven't fact checked it though.

[0]
[https://www.youtube.com/watch?v=f5SE47Xjx2Q](https://www.youtube.com/watch?v=f5SE47Xjx2Q)

------
FriedPickles
Seems better to have extra houses vs not enough, as here in SF.

------
fossuser
I wonder if part of this is a cultural thing and I'm not sure if apartments
count as homes.

I've heard from friends in the bay area that immigrated from China that buying
a house is a prerequisite for a man to get married (so family often helps
since bay area housing is crazy).

Supposedly this leads to distortions in the Chinese market where rental units
are relatively cheap, but purchasing costs are very high.

Maybe an apartment doesn't meet the marriage requirement for a housing
purchase?

~~~
swuecho
school are allocated based on house. rental apartment does not cout.

~~~
thaumasiotes
As far as I know, school is allocated based on your hukou, and whether you own
a house is irrelevant. (Except that in most places, owning a house is
sufficient to get a local hukou.)

~~~
alextooter
Good school need you have a house or apartment within 500 meters.Those
apartment may three times or more expensive than normal one.

------
bitxbit
Here’s the rub with Chinese real estate and the economy in general. Yes, it’s
true there could be demand for these “modern” homes but the govt can’t afford
to increase the standard of living too rapidly (or much at all). Meaningful
wage increase will effectively kill the Chinese economy especially as we
accelerate into autonomous manufacturing.

------
thedudeabides5
Let's say 1,000 sq ft a home

and $100 a sq ft

That's $100k a house.

Multiplied by 50m homes

is $5 Trillion dollars of inventory.

US GDP is ~$20Tr, for context.

Monetary policy matters. A _pause_ in the Fed tightening instantly flows
through to impact the market price for $5tr USD of speculative real estate, a
half a world away.

------
magoon
US has a 12.7% vacancy rate. I found that part of the article shocking.

------
kokokokoko
And yet some of the most expensive real estate in the world.

~~~
Arn_Thor
Only in a few tier-1 cities

------
chenpengcheng
The Government wants home price up. That is the single most important thing
about real estate in China.

------
est
China plans to reallocate 0.1bn people into cities before 2020. Go figure.

------
codrinf
this video explains the phenomenon pretty well:
[https://www.youtube.com/watch?v=f5SE47Xjx2Q](https://www.youtube.com/watch?v=f5SE47Xjx2Q)

------
madengr
Were these homes bought with cash or loans?

People don’t have to sell if they own it, but if they can’t make the payments,
that would be like the 2008 USA financial crisis.

------
OscarCunningham
It doesn't make much economic sense that these houses are empty. Why not rent
them out or sell them for whatever the market will bear?

~~~
thaumasiotes
Why do car dealerships not rent out their new cars until a purchaser comes
along?

You've probably heard that your new car loses most of its value (that is, most
of the value it will ever lose) the minute you drive it out of the dealership.
The label "new" is worth much more than the functionality.

This can also be true of apartments. I have seen it written that it is true of
Chinese apartments, though I can't personally attest one way or the other.

~~~
chii
A car loses value when used because the components degrade (presumably, a new
car not being driven, but stored doesn't degrade).

An apartment or house could degrade when being lived in - but that's the
internal furnishings, which is "easily" replaced. The concrete, walls and
other structural features degrade regardless of whether an occupant is in it
or not!

~~~
thaumasiotes
A car that you bought 20 minutes ago has suffered no measurable degradation of
the physical components, but has lost a very large portion of its "new" value.
The lost value is purely from the "new" label which the car no longer
qualifies for. That is why people will tell you never to buy a car new.

~~~
gruez
That's deprecation, and it's super fast in things like cars and consumer
electronics. However, as far as I know, homes do not deprecate rapidly (ie. a
"brand new" house doesn't command a significant premium over a comparable 1
year old house)

~~~
james_s_tayler
Homes depreciate rapidly in Japan. It's a cultural thing. They value newness.

~~~
thaumasiotes
> It's a cultural thing. They value newness.

This is also true in China. Shrink wrap is left on things indefinitely so that
they will appear to be new. I've seen it happen on things ranging from
doorknobs (already installed on the door) to board games (opened and played,
but with the shrink wrap carefully preserved to fit over the lid).

------
randomacct3847
I’ve heard the best housing “hack” for the Bay Area is to live in a houseboat.
Anyone doing this or calculated how much you’d save?

~~~
m4x
I have a close family member who did this in Auckland, NZ and it certainly
didn't save them any money. The main issue was that boats are expensive to
keep afloat and maintain, and depreciate in value over time (unlike a house).

Maybe the Bay Area is so absurdly expensive that a boat is a good investment,
but I would be highly dubious about it myself.

~~~
tCfD
"a boat is a hole in the water that you pour money into"

------
lewis500
Why does it say "homes" when the first sentence says "urban housing stock"?

------
vkou
There are also ~600M people living in relative poverty in the country side,
who would love to move to the cities.

How is this not a good thing?

~~~
fucking_tragedy
By what mechanism do you think poor people in the country will benefit from
this?

~~~
vkou
By the same way that building luxury apartments in San Francisco will,
allegedly, make housing more affordable for poorer people.

------
zachguo
(2018)

------
jerkstate
sounds like they need to accept more refugees

------
Apocryphon
Sounds like a solid solution to America's housing crisis once transfer booths
are invented.

------
kartickv
The government should make a law saying that houseowners shouldn't keep a
house empty if there's someone offering even a single rupee or yuan a year,
plus paying the insurance premium to protect the homeowner from any damage
done by the tenant, plus deep cleaning to restore the house to a rentable
condition when the tenant leaves. A landlord cannot keep the house empty if
there's at least one person offering the above, say prepaid for the next one
year to protect the landlord from having to chase down non-payers. As long as
someone is willing to do the above, the landlord can't keep the house empty.
The landlord can, at any time, ask the tenant to move out, refunding the
prorated amount that he already prepaid, provided the landlord isn't going to
keep the house empty.

With this, millions of people who're homeless will suddenly find a home.
Investments that have already been made will be useful to society, which
should be the case to begin with.

If this policy deters investment in housing, rents will eventually rise till
it again becomes sensible to invest in building houses. The market takes care
of itself.

Instead of a ban, perhaps a high annual tax, say 30% of the value of the
house, if it's left empty for more than a month a year.

~~~
logfromblammo
> _The government should make a law_...

King Canute should just decree that the tide is to go out.~

No matter how you structure the law, the capacity of property speculators to
evade its intent will likely exceed the government's ability to enforce it,
especially when some of those speculators are government officials.

I foresee that a vacancy tax would be avoided by building apartment buildings
that are only 80% finished, or whatever the law threshold may be, such that
they do not qualify as vacant housing units, but can still be brought onto the
housing market more quickly than erecting a new building from the foundations.

~~~
kartickv
Your points would be received better without the sarcasm in your opening
sentence.

Regarding your point that this tax will be hard to enforce, why do you think
this is harder than to enforce than the cornucopia of taxes and construction
rules we have today?

Regarding your point about leaving buildings 80% finished, there can be
another tax on land not put to productive use. This would include both land
left empty, and unfinished construction. In return for these taxes, eliminate
other taxes like property tax, stamp duty, registration, transfer of
ownership, etc.

