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A Fifth of China’s Homes Are Empty (2018) (bloomberg.com)
291 points by paulpauper 61 days ago | hide | past | web | favorite | 181 comments

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.

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.

That is actually quite a large difference. China deliberately build ghost towns and pull in lots of people into urbanisation. If they had build a 20% buffer zone in Shanghai, I don't know how many will try and rush to that places and causes all sort of problem.

The SF problem is a lot like HK. There are far too many parties invested in property, therefore it is their interest to keep property building low and push the price as far up as possible. Government being extremely slow to react and by the time they do, those parties will try to delay it for so they have time to offload their asset.

The only way to go about it, is to build Satellite cities and try to move people out of it. Which in US is easier said than done.

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.

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.

In fact, the earliest anti-housing policies were designed to harm Chinese residents of the city: https://www.collectorsweekly.com/articles/demolishing-the-ca...

  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.

Pretty sure there would be water.

Pretty sure not everyone would like how.

Yes, they'd have demolished all of the old housing and it would look very different.

yes, but they aren't, and that's why we're in this mess. not enough housing driving up the cost to the point where most can't afford it anymore or barely afford it.

Rich is relative, depending on the cost of living. Right?

If you make minimum wage in the US and work 40 hours a week, you’re in the global top 10%.

SF is not going to implode any time soon though, which is why I say it can 'afford' it. China is a different story.

i'd say a decade is pretty "soon" for a city.

> I'd much rather face the problem of building empty homes (which is not really a problem?)

Not in and of itself, but if you look at historical parallels, like the development of Brasilia, the consequences were devastating: over a decade of hyperinflation and a series of failed currencies until one stuck.

It seems like China is building hundreds of Brasilias all at once.

Maybe Beijing has figured this out, and this will lift more people out of poverty than ever in history? Or maybe this isn't different and the reckoning on the back end will be unimaginable?

Never in history has local economic policy affected so many, and it happens to be in a setting where you aren't really allowed to debate economic or government policies.

Maybe it will all work out but it's a scary ride.

I don't know where you got your statistics most are false, half complete or misleading. Even in place like Shanghai, its been around 15 years they built Lingang City is still empty, now waiting for Tesla factory to populate, govt spend over 38 billion dollars to build it, people bought apartment blocks seating empty or acting as construction workers living quarters.

Go to a mall right next to Huangpu river near Lupu bridge mostly empty for last 10 years built by Greenland (it's the main downtown area). As others pointed out most of these homes and commercial ventures are waiting for price rises to sale and are seating empty. This narrative of urbanization is pretty old, now it's impact is very little in city like Shanghai.

At present across China there is price but no buyers. People are holding on to real estate until they get atleast bit more than what they bought. On the other hand people's saving has already been consumed by SOE and govt spending. So the only way to prop up economy is to print money like USA. As long as other countries do not want RMB to depreciate, they can print money and prop up the economy.

>I don't know where you got your statistics most are false, half complete or misleading.

Official Stats? ( But as you know Official Stats could be wrong too ) I never said the City they built out NOW have to be filled within 2 years. There are some that strategically don't work and are left there like ruins. Some are waiting for their turns, some may never come. And they will likely knock those down and rebuilt again. And when it comes to urbanisation, why would anyone wants to pull people from rural into First Class City like Shanghai? There are lots of places in Midland and Western ( The so called Great Western China Development )

I am not talking of 2 years, Lingang is built for over 12-15 years and it was an idea of Shanghai government to move Pudong Govt offices to Lingang, which did not happen as no one wants to go there and it is still sparsely populated area of Shanghai with lots of empty apartments (I think over 50-60% empty) obviously bought as investment properties.

Can you give me the address? I’ve seen plenty of new malls that are half empty but they’ve all filled up so far. In the six years I’ve lived in Shanghai the “cool” areas where foreigners live have expanded markedly. Then again I’d never even heard of the Lupu Bridge until I looked it just now. The Fabric Market is near there, unless they’re just refusing to let lie class tenants rent there any mall should be full like the old fake market at Qipu lu.

It's not one mall but series of malls and offices between nanpu and lupu bridge near the Puxi side expo areas (mostly without much foot traffic or shops). They are there for over 8 years.

You probably can take a bicycle and ride along the Huangpu river from Nanpu bridge towards Lupu bridge. It's a beautiful bicycle path and you can see the empty malls and offices.

2. There are empty homes in 10 year old complexes in Beijing and Shanghai.

3. Many of the ghost districts never fill up before they are torn down as eye sores. Kangbashi will only fill up if coal makes a big come back, which is highly unlikely. Tianjin financial district is mostly a bust so far, but a derelict building or two for a decade is not abnormal.

The problem is really simple: China lacks a property tax, so housing is seen as a speculative investment rather than just a place to live in. And China is not wanting for speculators.

Why is it seen as a better speculative investment than other opportunities. After all, someone is left holding the bag when the investment is found to be unused -- which is a cost just as much as a tax would be. What other considerations are outweighing that cost?


The entire Chinese economy is as rigged as the government can make it. The stock and bond markets are fake, the state owned enterprises are run as fiefs of the Party-State, not for profit, all the major banks included. Nothing is trustworthy. Combine that with a property market that’s been going up for decades and a ruling class that would not be happy if the middle class that started rioting if their savings in property went up in smoke and you have a fake property market too.

China controls how capital can leave the country. There is a lot of money just sloshing around within China hungry for investment. And the financial sector is relatively underdeveloped with a volatile stock market.

As a result, Chinese money loves chasing bubbles in search of returns, like P2P lending and crypto.

Because property values have skyrocketed in big cities. Of course, that's no guarantee that they'll continue to rise, but, this history looms large in media and culture. Everybody knows somebody who became rich this way: "My classmate's parents bought him a condo in Beijing in 2008 and now it's worth millions!"

There is also the continued migration from rural to urban, ensuring that demand will continue to increase for a while yet.

One thing I found when looking into investing in Asia is that p/e ratios are... extreme.

Purchase to rent ratios are also extreme in china. Good investing is tough.

>The problem is really simple: China lacks a property tax, so housing is seen as a speculative investment rather than just a place to live in.

The government should read Henry George. Well, everyone should read Henry George.

Houses are seen as speculative investments for the vast majority of US home owners also.

Not really in the same way. High property taxes mean you usually can’t sit on a property and wait to flip it, it has to be put to productive use because deprecation (through taxes) happens right away. No one can really afford to buy an apartment building, decide that renting the units isn’t worth it and just sit on the empty unrenovated apartments until buyers come along.

In China, you can buy property and just sit on it. Many apartments are never even renovated because market level rents are too low to justify that. Yes, they apartment costs 7m yuan to buy, but only rents out for 10k yuan/month that doesn’t even cover interest. Keep in mind that renovation actually decreases an apartment’s value because new owners have to unrenovate it first.

US property tax of 1% or rarely 2% is not much of.a speed bump when you are chasing 10+% gains.

10% gain won’t even cover sales commissions. If you can ignore property taxes and do nothing with your property, you are looking to make 50% at least in a few year period.

I thought it was clear from context that I meant annualized.

Very important point. A common way of measuring China's surplus housing stock is by "months of sales". Housing inventory actually peaked back in 2015 at nearly 28 months of sales. It's now back at late 2013 levels of a little over 23 months of sales. Nothing to be alarmed about, even if it rises a little.

That omits the fact that big amount of the "buffer" was unsold for way way more than a few years, and the most liquid part of the stock are the bespoken 1000sq metre luxury mansion apartments.

There are a few more factors that are unique to China's situation:

- New construction condos are a better investment proposition than in the West because (1) there's no property tax, and (2) other types of investments are less reliable (e.g., stock market is rigged) - There's a cultural aversion to 'used' things, which explains why an investor might prefer to let a condo sit empty instead of rent it out. - Because they're seen as an investment, some new construction is actually built with the intention of selling directly to investors.

Letting an empty condo sit and later, much later sell is not new.

The central authorities control the central bank, the banks, and perhaps importantly: the press. And of course policy/taxation.

So they can stop a lot of rampant speculation through a variety of measures, meaning hopefully, they can kill any bubble-like blowups.

As you say, there's a lot of poor folks and a lot of empty homes, maybe that does mean a haircut for home owners, but it might possibly be done in a way that doesn't cause any bursting bubbles.

So long as there is something to underpin reality (like ex-poor people wanting homes) they can make a soft landing for all of this.

The more existential concern is: 'what then'?

The path has never been so uncertain.

I'd say the danger for China is not being unable to handle a consumer bubble. As you've pointed out, they have a lot of tools.

It's their not recognizing they're creating a government supply bubble.

The real weakness of demand economies historically hasn't been their difficulty producing basic things (that they feel are necessary), but knowing when to stop producing things. Absent free market signals, there's not a lot to tell you when to put the brakes on.

That's a great point, that said, I'll bet they're aware of the problem you mention :)

But macro-macro I see China going the very same thing Germany/UK/France, then Japan, then Korea did after WW2: they all rebounded to a certain degree and did so with nationalist fervour where applicable, and then kind of softened as they stopped having as many kids... and the kids lost the hyper passion their parents did.

China is almost there with a lot of this, and soon it won't matter what they do, there's a limit to the demand for their stuff, they can only build so many homes, and they're having fewer babies, and those babies don't want to be slaves.

China is 1980's Japan, just a lot bigger.

You mean "command economy"?

I read a different article (also on HN) that people will buy real estate without actually living in it. It's probably a smart investment if you combine it with your comment - if it's planned for a city to be "next in line" then the price of those apartments will rise after a couple years of being empty.

Well some people are going to always stay in rural areas right? China will still have some agriculture.

Yes and true. But I mean 500M in rural is 30% more than the total US population. With modern technology there are very little need for hundreds of millions people in agriculture. There are billions of funding to help farmers modernise their tools, drones and machines doing the work. ( Although that has not been working so well, turns out Machine Learning, Drones, or other tech can only do as much when your soil is pretty much in a shit state )

America is also a developing country. It's not like anywhere is ever finished developing.

Let's replace "developing" with "in the progress of rapid urbanization".

According to wikipedia (https://en.wikipedia.org/wiki/Urbanization#/media/File:2015_...), US is already highly urbanized but China's not.

As long as we agree that high rate of urbanization is the future, China basically has more room to grow in this aspect.

China's government might not want to continue with their high urbanization policy in the future. Perhaps they want to keep, say, 20% of the population in a poorer rural environment so their country won't have to bring in migrants to do the work migrants traditionally do in richer countries and territories like the U.S., Hong Kong, and the UAE.

"developing country" is a term used in economic discourse to mean something rather specific -> https://en.wikipedia.org/wiki/Developing_country. It has pretty specific criteria what qualifies, and America (the richest country in the world) does not.

Yes. And I think it's dumb. The article linked to states it in alternative words "low and middle income country LMIC". I think that's an order of magnitude better.

I know I'm nitpicking and being an asshole about this point, but I think words matter. How we talk about things feeds in to how we conceptualize things and our mental models are like low quality, compressed, cartoon versions of reality and getting them more accurate at a fundamental level goes a long way towards improving the end results of our cognition.

It also used to be called First World, Second World, Third World. It's not anymore. Discourse changes because people stop agreeing on terms being useful, accurate, or good.

I liked Hans Rosling's level 1,2,3,4 stratified model a little better.

Communication is nuanced, not my fault that words have a commonly accepted definition even if it has unexpected connotations attached.

Understand the frustration though.

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.

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.

    My theory is that many developing countries use 
    the wrong metric to gauge their success
More cynically these developments are probably a conduit for a lot of money getting into the pockets of corrupted public officials.

If you haven't already seen it, take a look at this video [0] showing a line of tank trucks filled with sewage, because Dubai built a lot more skyscrapers than their sewage system could handle.

[0] https://www.youtube.com/watch?v=z1Hv8IHA3ig

In this case most of the 'locals' are foreign men brought to Dubai to work on the sites. They live in horrible accommodation further out into the desert and probably wouldn't even be let into the malls if they tried.

I can't find the link right now, but I think the right idea here is that the value of infrastructure is in its use. The more that the people building stuff are insulated from the needs of users, the less you should expect it to be useful.

Large corporations face exactly the same problem.

And in a nutshell this is why my beloved NYC's subway is such a disaster :(

>And in a nutshell this is why my beloved NYC's subway is such a disaster :(

It's not like the people building terrible systems don't know there is a disconnect with their users. They just don't care.

I know a guy who works for a similarly corrupt and incompetent rail system. They told him not to take the train to work because if he was late "I was on your train and it got delayed" was not a valid excuse for being late. Management knows the system sucks.

Indeed, probably the biggest advantage that our societies have to the rich elite of repressive countries is the justice and governance system.

The problem with being rich in one of those oppresive regimes is that you can get rich. But staying rich is much harder, because the moment you fall out of favor you will be disowned. This can change simply through a new clan taking over power and kicking out the old clan. In the capitalist west, this is much different.

I personally think the best place is where the intellectual elite chooses to live. E.g. in the early medieval ages, the church harassed a bunch of intellectuals for their "heathen" ideology (greek philosophy, sciences, etc). So they all moved to the middle east, causing a great period of prosperity. Socialism, similar thing here. Russia had so many great minds. Scientists, authors, poets. But many of them went to the west and are still doing it. Same for germany btw, here eastern Germany was a big hub of culture, e.g. Leipzig was renown for its books, but socialists harassed and hated every intellectual (even more than they harassed the general population), so many of them fled to the west, so many in fact that they had to build a wall to keep them in. The western part of germany greatly profited from this brain drain.

It's not dangerous to democracy if these autocrat regimes build luxury condos that nobody lives in. It's dangerous when they build luxury condos and the elite choses to live there. In our world which is so much dependent on science and engineering, they chose which country, which region inside a country, prospers and which doesn't, simply by chosing where they live.

>So they all moved to the middle east

This is an interesting historical claim. Which intellectuals are you thinking of that moved from Europe to the Middle East in the early Medieval period?

I was also curious and looked it up:

Pagan philosophy was gradually supplanted by Christianity in the later years of the Empire, culminating in the closure of the Academy of Athens by Justinian I. Many Greek-speaking philosophers moved to the east, outside the borders of the Empire. Neoplatonism and Aristotelianism gained a stronghold in Persia, where they were a heavy influence on early Islamic philosophy.


And a little more:

The last Scholarch of the Neoplatonic Academy was Damascius (d. 540). According to Agathias, its remaining members looked for protection under the rule of Sassanid king Khosrau I in his capital at Ctesiphon, carrying with them precious scrolls of literature and philosophy, and to a lesser degree of science. After a peace treaty between the Persian and the Byzantine empire in 532, their personal security (an early document in the history of freedom of religion) was guaranteed.


It's more accurate (somewhat) to say that a lot of intellectual activity moved. The issue is historiographically complex but the traditional view of early medieval Europe not doing a lot to advance human knowledge except in some specific (and not very abstract) fields is mostly true.

Yeah, but it's not really accurate to say that intellectual activity moved because the Church was systematically harassing philosophers.


> Shenoute is now considered a saint in the Coptic church, but his piety manifested itself in a particularly ugly guise: he was part of a gang of thugs who would break into the houses of locals whose theological views they felt to be unsound, and smash up any property they objected to on religious grounds.

> Early in the book, she describes how she was brought up in her youth to think of late-antique and medieval Christians as enlightened curators of the classical heritage, diligently copying philosophical texts and poems throughout the ages so that they were saved from oblivion. Her views in this matter have evidently shifted somewhat over time. In this book, early Christians are much more likely to close down the academies, shut temples, loot and destroy artwork, forbid traditional practices and burn books. Rather than praising Christians for preserving slivers of classical wisdom, she argues, we should acknowledge how much was knowingly erased.

And quoting another article about the same book:


> And so she opens her book with a potent description of black-robed zealots from 16 centuries ago taking iron bars to the beautiful statue of Athena in the sanctuary of Palmyra, located in modern-day Syria. Intellectuals in Antioch (in ancient Syria) were tortured and beheaded, as were the statues around them.

I personally find that it's very important to know the past, so that it won't be repeated in the future.

>Intellectuals in Antioch (in ancient Syria) were tortured and beheaded, as were the statues around them.

And you use this as an example of religious oppression in medieval Europe (?)

Here is a good critical review of the book you're citing:


> a bunch of intellectuals for their "heathen" ideology (greek philosophy, sciences, etc). So they all moved [...]

I think the suggestion is that the ones who were persecuted moved, not all. Basically "the bunch".

Well yes, but I wonder who that is supposed to be, specifically.

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

China is the second-largest economy.

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.

That's because it's big not because it's developed.

>In 2012, I traveled for about 6 weeks in China. ........None of this made any sense

It really doesn't. That is until you visit there again in 3 - 5 years times. Everything is different. You start getting lots more people and spending money. Ok it is not like everyone becomes wealthy overnight. But from Zero to having a few people actually buying, shopping and eating in these malls is quite an achievement. And they move from bottom class Third Tier cities into upper class Third Tier etc...

I have seen it, it is a little hard to comprehend. I still don't know how everything was possible.

When I saw the section of my comment you quoted, I thought you were going a different direction, which is pointing out that my original comment reads like a satire of HN commentary: "I dabbled in something as an amateur for like a month and now I don't believe any experts because I'm so much smarter.."

Anyway, I'm perfectly happy to be wrong here, there's clearly a lot about macroeconomics that I don't know (that people don't know?). So, if you say that it's happening despite its weirdness, well, that's something.

I just think we have a big enough theoretical apparatus for why state-directed economic development is inefficient that the burden of proof is on people saying "things are going well in China." Especially because we can be pretty confident that some large percent of the statistics we see on development are forged.

For claiming to be high-end brands, the amount of Gucci, Swarovski, Prada et al shops really cheapen them as a brand.

I've seen similar stuff in vacation destinations in Turkey and Greece; poorly developed areas next to a road (think just bare rock and shrubs) with a super fancy looking fur coat shop. Fur coat shops, in 35+ degree C weather. I want to believe they get the odd rich Russian coming over from time to time, but TBH they're probably money laundering fronts.

They're not "high end" brands anymore. The companies that own the brands have it down to a science, every few years they start lowering one of the more expensive brands down, and the masses start using it as a status symbol, until too many of the masses have it, then rinse repeat with another more expensive brand. See Fendi, Gucci, Swarovski, Michael Kors, etc. The most recent one I noticed was Yves Sant Lauren, with their items badged with an ugly YSL logo.

Basically, if you see middle income people start carrying around products badged (having logos on it is itself a signal that it's not high end) with the brand and sold in Macys, it's being stripped of it's high end status. And then even the middle income people start noticing everyone has it, so it devalues it for them, so the fashion brands need a new company to present as "high-end".

They can always come up with another hard to pronounce French-like name.

Saw the same thing in Guangzhou.

New neighborhoods the size of downtown San Francisco, and barely anyone around. A few police, the odd person riding a bike, but otherwise you could throw a bowling ball down most streets and not hit anything.

The more I thought about it, the scarier it became. This is a bubble that makes all before it look insignificant in comparison. The question is whether the government can guide it into a soft crash landing.

I have to agree with you on this even in 2018. I have been fortunate enough to travel to many places in the world and China definitely struck me as the most strange in terms of development.

I constantly hear about China being an econ powerhouse, the future of the world, everyone wants access to their huge middle class, etc. But for my one week visiting Beijing and Shanghai I was confused to say the least.

The most impactful thing I have ever seen was on the high speed train between Shanghai and Beijing (about 5 hours at 190 mph) and I have never seen more highrise apartments completely empty in my life. In fact, at some points, I would look out the window and see over 200 of the exact same highrise perfectly spaced and all very clearly empty. I would say a lower bound on the number of 20+ story apartments I saw in 5 hours is somewhere around 10,000. I could be off, but I was pretty attentive to it the entire ride. Most of them were empty(given the lack of any humans, vehicles, or clothes on the balcony around them).

The wildest thing was seeing some of these highrises plopped in the middle of a farm. Nothing around, not even a cement road, and just an unoccupied apartment, 20 floors tall, surrounded by fields of whatever crop it was.

I started to hypothesize that the massive construction SEO's in China were used to subsidize jobs for rural workers and nothing else. It seems like construction would be a good industry to try to bring lesser educated and rural populations to higher wealth due to the high need of labor. This is total speculation so please don't blast me, but it seems possible.

Anyways, I was shocked at seeing this and I wonder if anyone can add other anecdotal evidence of something like this in another Chinese region. The great wall was pretty cool though:)

That is an artifact of the communist way of thinking -- central committee, five year plan, etc. Forging ahead on will and politic alone, with little regard for reality, demand, supply. It is fascinating to see it combined with the forces of capitalism.. like some strange hybrid, one animal with the head of another.

Lived in both China and USA for 10+ years each. Things that make no sense in American eyes make a lot sense in China.

> In 2012, I traveled for about 6 weeks in China.

Six weeks staying in China means nothing. China is already the 2nd largest economy but it still develops at an unprecedented rate. Urbanization in the country only reach 60% and will increase to 90% in 2030. 'Ghost cities' and empty malls will be filled very quickly in the next 3-5 years. There's actually a shortage of malls/supermarkets/schools in most communities in China, and that's the reason why e-commerce prevails and companies like Alibaba are reinventing retail.

> So pretty much everything I read about China's economic development, I don't believe.

You shouldn't, especially if you only read reports from Western sources, which are heavily biased and often telling only what people prefer to hear. People in the States are either ignorant on what's going in China, or so entitled to think there's only one way for how societies work.

It's a fair point, 6 weeks 7 years ago is nothing. This is the data I collected, but my priors are that state-run economic development tends to be inefficient and that the stats we're reading from the CCP are false. These are pretty strong beliefs for me. But if I had more data I might come to a different conclusion.

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.


I think a crucial piece of information missing (maybe you have it) is the age/condition of those homes. The US has a lot of vacant homes in low-opportunity areas that are reaching the end of their first usable life and need a lot of money out into them to bring them up to standards. I’ve heard that China has been building a lot of new property that isn’t being inhabited. Those two cases are a bit different.


As that notes, there are significant deficiencies in a lot of the cheap housing stock in lower-opportunity areas that need money to fix. Those properties going unoccupied can still be an issue, but it’s different from speculation on new property. Vacancy rates in high-opportunity US cities are very low.

From what I’ve heard, the situation in China sounds like speculation on new properties, rather than aging housing stock that requires significant reinvestment.

It's not even speculation. Urbanization is an ongoing process. Those properties will be filled. Whether or not the developer is liquid enough to hang in there until they do is irrelevant from a societal point of view. That's all numbers and loans. People will inhabit those homes in a few years and the local communities will thrive and generate economic growth

That is naive. Many of those properties are built in places where they won’t fill up: coal mining towns that are on the decline, 3rd and 4th tier cities that barely qualify as urban, 40 miles away from the nearest job in a second tier city.

Yes, you can buy way outside the sixth ring road, but they have no buses or subway, what will you do, drive?

Sure, not every single project is going to succeed. But the government is executing a long term strategy. Rather than a few extremely large megacities, the plan is to boost mid-tier cities and the small towns that connect them. So a lot of these small towns that don't have anything going for them right now will be connected in time. Spending on building out infrastructure continues. Remember the photos from a few years ago of subway entrances in the middle of a field? Now they're in the middle of dense neighborhoods.

When did that change? They were incredibly trying to cultivate and outright force mega cities.

Leaving behind mega cities that are empty. Hell if you want to play out a pretend version of "I am legend" you could get pretty close. (Minus the zombies)

This animation by McKinsey shows a number of different paths for urbanization. There are many neuanced models, but they commonly divide into "supercities", "hub and spoke" and "distributed growth". https://www.mckinsey.com/tools/Wrappers/Redesign/Interactive... Quote from a related 2009 report called "Preparing for China's Urban Billion": "China's current urbanization path will show a pronounced expansion in the number of midsized cities across the country. Although China today has two megacities [Shanghai and Beijing] and a number of prominent hub-and-spoke systems [...] many midsized cities are growing in parallel and will become more and more relevant in the national landscape."

Now, I haven't done any close reading on this for the past few years, but back in 2014 or so the consensus among China-watchers was that the government both in policy and in action had clearly staked a path somewhere between the "hub and spoke" and "distributed growth" models. The high speed rail network is an important part of this, creating economic hot spots along the path between existing supercities. In fact, in the intervening time they have disincentivized further growth of Shanghai and Beijing, and is creating a new administrative city south of Beijing and west of Tianjin rather than expanding each of those two supercities.

I have no idea what empty megacities you're referring to...

No one significant has ever said China has empty mega cities, or even empty cities, they are more like empty districts of existing cities (eg Kangbashi of Ordos, Tianjin Financial district, etc...). The western press latches onto “ghost cities” because Chinese city/town administration units are weird to westerners.

This is the comment I replied to: "When did that change? They were incredibly trying to cultivate and outright force mega cities.

Leaving behind mega cities that are empty. Hell if you want to play out a pretend version of "I am legend" you could get pretty close. (Minus the zombies) "

I am I having a stroke, or did that comment refer to "mega cities that are empty"?

What, within context of what we are talking about, defines "vacant"

I grew up in Lake Tahoe , and having gone up recently for my Dad's memorial - and talking to some of the wealthiest realtors in the region - coupled with how areas of tahoe are literally banning AirBnB - they have a crap ton of "vacancies"

But its not like these are not owned-homes - they are just not lived in/abandoned.

Basically, the homes were bought in the past decades for fractions and either rebuilt/remodeled such that now there are +++% of the homes which are +Million$ vacation homes.

The problem with this is that it happened so densely so quickly, that the idea of running a small business in Tahoe City is tough due to lack of traffic as well as lack of workers - as you cant have workers who have no place to live...

Is there a global institute for urban planning who is attempting to address some of these issues.

In dealing with the local cannabis regulations across every county in California, and the local city planning department jurisdictions within these... my take-away is that its a ridiculously fragmented understanding of both problems and the solutions.

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.


I think it should be 17M (12%), I tried plotting it in FRED: 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.

Like a lot of stats, one has to sit back and think of the definition and not let intuition or feelings get in the way. I can't comment on whether that is or isn't high, but I've got some experience trying to calculate such in Australia. You've got to take into account:

- abandoned yet still livable homes

- new construction not yet moved into

- houses currently in the state of being sold

- old buildings not yet demolished

- airbnb and short term rentals currently sitting empty: seasonal housing usually makes up a large extent of vacant housing in a country

- accomodation for workers/fly-in-fly-out workforce

- rentals currently vacated because they can't find a tenant

- rentals currently tenanted but not being occupied (because of moving in/out consecutively with other properties)

- holiday homes not being used

The Aussie census also calculates about 11% of homes being vacant on census night.

Like with employment markets, most people seriously underestimate the true 'state of natural churn' in these stats that can be found in a modern day country/economy, and just form a picture in their head of an apartment block just sitting there doing nothing all the time or wonder why people aren't being housed in them.

> That would be more than 1 in 10 homes

I know this stuff can be highly market dependent, but that roughly matches on-the-ground observation in Midwest. (11% of homes are vacant, rental units have a ~9% vacancy rate).

Some of those houses are in disrepair (unlivable). Some of the units are brand new (not yet occupied). Some are bank owned investment properties (intentionally empty). Some are between occupants. Etc.

Maybe together with houses that are not in living conditions, those numbers would be, right? How many abandoned farmhouses are there in the US?

Try driving around resort towns in the offseason or even midweek. Nearly all empty. ITs really noticeable compared to other countries.

And how many are homeless and living in bad condition?

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:


    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

Maybe, if you consider that trend line to be a stable one that'll just keep progressing upwards on the chart. But that doesn't seem to be a sure thing.

Also, the state of some of these buildings is worth noting - Much like Nail Houses, there's a significant portion of these developments that were made to sell for investment purposes alone, and are not going to be suitable for habitation.

Source on that, please. Sure, the construction work can be shoddy (though it's improved a lot in the last five years, and unsold property in CHina right now is usually younger), but it's absolutely livable

"Immediately above us towered what could have been the headquarters of a bank — forty floors of office space, wrapped in a shell of mirrored panels. In its un-maintained state however, these reflective scales were falling away in great swathes, to expose the bare concrete beneath. Not even finished yet, and already it needed a makeover."


"the farmers that own the land here get the cheapest materials, and make these pop up out of nowhere": https://www.youtube.com/watch?v=BcyYyyaPz84&t=666

Follow-up video "Are new chinese buildings really falling down?": https://www.youtube.com/watch?v=XopSDJq6w8E tl;dr yes. Note at 2:30 "We saw this place being built three years ago".

There must be a lot of vacant/abandoned homes in the countryside with such a rapid shift.

I'm guessing they're quite modest third world dwellings.

Yes, I can guarantee from my personal seeing of my home village that the government indeed can mobilize people moving into apartments in city.

Now I look back, China really will be the next super power. The management and controlling are simply on a different dimension.

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.

That assumes that China will welcome immigration on a historically unprecedented scale. Seems unlikely.

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

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).

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

They've already tried to annex a part of Myanmar...

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

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).

According to [1], there were about 814 million urban residents in 2017. Assuming an increase upto 850 over 2018 (and it's probably lower than that, checking the historic increase), the average occupancy is closer to 3.4, which is more realistic.

[1] https://www.statista.com/statistics/278566/urban-and-rural-p...

My Vietnamese home has 6 people. mother, father, me and my brother, 2 of my cousins.

One child policy since 1979 https://wikipedia.org/wiki/One-child_policy

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.

That's just the _urban_ homes.

What percentage of the population is urban these days?

Answered in the other sub-thread (https://news.ycombinator.com/item?id=18936054)

55%. So over 770 millions.

the numbers were for urban homes I believe. China has a LOT of rural or small-town inhabitants. Not sure what the breakdown is these days though.

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)

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

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...

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.

Yeah, the curious thing is. China still borrows cheaply from the world bank and they use that ( partially) for the one road, one belt initiative.

This has very recently changed, if I'm not mistaken.

It's part of not being an developed countries. And the requirements were accepted by a loan to the world bank of 7,7 billion $ from America ( from memory)

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

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_...

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

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

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?

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

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.)

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

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.

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.

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

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

Only in a few tier-1 cities

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

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

this video explains the phenomenon pretty well: https://www.youtube.com/watch?v=f5SE47Xjx2Q

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.

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?

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.

not to mention these properties need to be occupied and maintained - look at the homes abandoned during the bubble - all manner of ills happened that resulted in all kinds of tear downs...

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!

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.

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)

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

> 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).

First three rules of real estate: location, location, location.

Would you be interested in renting a 400 sf dilapidated teardown shack in western Kansas, no utilities, five hours from the nearest big city, no local jobs, and not near anything of consequence?

As young Chinese flock to the large cities, they might have grown up in something similar to the above, but just because they're leaving it behind doesn't take it out of the housing stock.

That's perhaps a bit of an oversimplification, but a good number of that double digit percent is abandoning the rural lifestyle held over from the cultural revolution.

The article says these are urban homes, not rural ones.

Would you want to live at 8 Mile, or Compton?

What's the Fourth rule?

there are no such thing as houses in urban china. these homes are apartments you basically get on a 40 year lease. when the lease is up the govt pays you to move out. also, when you buy an apartment in china, it's not finished. there's no flooring, paint, appliances, etc. the price of a finished one is the same or less as an unfinished since the new owner will usually redo the interior. so a lot of these new apartments are left unfinished in anticipation of the next 10x payday as has historically and repeatedly happened in urban cities.

several corrections, apartments are typically leased for 70 years, 40 is for commercial property which are sometimes inhabitable.

some apartments are finished, these days it’s more likely you’ll find a fully finished apartment, ready for move in, but they do have the unfinished apartments, but it’s too much trouble and trending down lately.

you’re right about the investment aspect, i believe in early < 2012, there was no limit to the number of houses you could own or mortgages you could take so the extremely weathly purchased apartments in batch as investment, never considered living or renting these out, many of these back then were unfinished, so you pay off the downpayment, get a mortgage, and leave it as an investment to sell later without having to deal with the complications of outfiting the apartment with drywall, hardwood floors, appliances, fixtures, paint, etc, and having to deal with rental hassles. basically what they purchased were these concrete enclosures with basic plumbing and electricity in place.

i used to rent an apartment in downtown shanghai, 2 bedroom, 1 bathroom, roughly 100 sq m (1000 square foot) new apartment, fully furnished with 60 inch led tv, furniture, etc, that cost me about 6k rmb a month (1000 usd a month), to buy would have cost me about 4m rmb (670k usd), i had pretty good relationship with the landlord, her father owned about 20 similar apartments in the complex, they were from a small town.

>i used to rent an apartment in downtown shanghai, 2 bedroom, 1 bathroom, roughly 100 sq m (1000 square foot) new apartment, fully furnished with 60 inch led tv, furniture, etc, that cost me about 6k rmb a month (1000 usd a month), to buy would have cost me about 4m rmb (670k usd), i had pretty good relationship with the landlord, her father owned about 20 similar apartments in the complex, they were from a small town.

Hahaha, things are even more crazier in Shenzhen. You can rent a 1.5 million buck apparent for $500

This was back in 2010, now that same place to buy is around 8m, at its height it was 12m, i think it rents for 10k now.

I always found “bear” a weird way of phrasing pricing in a competitive market.

For monopolies yes. But for commodities, you have to go with the market rate - best value product wins the sale.

If 1/5 are empty, the surely is no rental market

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?

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.

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

Wait list for a berthing that allows house boats is at least 9 months when I looked into this several years back. IIRC there's a restriction that no more than 10% of any marina's berthing can allow live-aboard tenants.

In some european countries docking is super cheap and you can buy a used sailboat for 2000euros. 4g mobile net is great. Croatia, greece, spain, italy. Of course not the best ports. I know it doesnt answer the question but wanted to chime in about our situation. Currently thinking about a live in sailboat in the canary islands. I work remotely.

Might not be as much as you expect. Boats are notoriously expensive to maintain. Not to mention docking fees, etc. In other parts of the country owning a houseboat will definitely cost you more than owning a house. At that point, why not move?

You can probably save some considering how expensive the bay area is, but you're also living in cramped quarters with downsized appliances (which I guess is normal for the bay area :P). Also, boat showers really suck.

I have a friend who explored it very seriously. According to him, it’s not as advantageous as you might trying when it’s all said and done.

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

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?

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

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


sounds like they need to accept more refugees

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

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.

> 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.

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.

This would certainly eliminate the rental market altogether, if that was your goal.

You haven't explained why that would happen, nor has any of the downvoters.

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