How many “vacant houses” are there currently in China?

This photo taken on September 24, 2023 shows residential buildings in Chongqing, southwest China. Photo by STRINGER/AFP via Getty Images

While the U.S. faces a housing shortage and affordability crisis, leaving Gen Z wondering if they’ll be able to achieve their idealized white picket fence American dream, China is facing an entirely different kind of housing nightmare. I’m in the middle of it. Years of overbuilding, fueled by debt, have left the country with rows of vacant buildings and almost completely vacant “ghost cities.” And now, the former government official said, the number of vacant homes is so high that the country of 1.4 billion people is struggling to fill them.

“How many vacant houses are there now?” He Jian, former deputy director of China’s Bureau of Statistics, said at an event in the southern industrial city of Dongguan over the weekend. Reuters First reported. “Each expert gives very different numbers, and the most extreme opinions believe that the current number of vacant homes is enough for 3 billion people.”

“That estimate may be a little high, but 1.4 billion people probably won’t meet it,” he added, referring to current estimates of China’s total population.

Estimates for the number of vacant houses and apartments in China vary, but experts believe a range of 65 million to 80 million is a reasonable number. Ken seems to suggest it’s not the whole iceberg.

that “It’s not just a cyclical adjustment.”

China’s real estate market has contributed to boosting the country’s GDP for decades, making it the most important sector of the Chinese economy. In fact, according to a Bank of America research team led by China/Asia economist Ouyang Miao, China’s outstanding home loans alone amount to 31% of GDP, and 59% of the nation’s household assets are held in real estate. That’s what it means.

But in recent years, China’s post-pandemic economic experience has differed from that of the United States and Europe, with deflation, rising youth unemployment and soaring inflation amid overheating Western economies. facing a lack of demand. . As a result, cracks are starting to appear in the country’s once red-hot housing market, with big developers in a particularly dire situation. The first pillar to fall was real estate giant Evergrande, which defaulted on its debt in 2021 amid mounting losses. In 2021 and 2022 alone, Evergrande incurred losses of $81 billion, more than Panama’s GDP.

The pain in China’s housing market continues this year as real estate sales plummet, leaving Evergrande’s peers in limbo. Country Garden, the nation’s largest real estate developer, narrowly avoided defaulting on its debt this summer after posting a net loss of $6.72 billion in the first half. And China’s real estate development stocks as a whole collapsed in 2023, losing $56 billion in value.

The developer issue is an example of ongoing structural changes in China’s housing market, which could disrupt the sector’s historical growth drivers.

Miao Ouyang’s Bank of America team said in a note to clients on Thursday that years of overbuilding combined with China’s aging population have saturated the housing market with inventory and slowed demand.

“The downturn in China’s housing market is not just a cyclical adjustment, but also reflects a long-term decline in the underlying demand for housing,” they wrote, and one report found that China’s urban It pointed out that 96% of households already own at least one house or apartment. 2019 People’s Bank of China Survey.

For Ouyang and many of her fellow economists, China’s real estate market problems raise serious questions about China’s ability to continue growing at the pace of the past decade.

“Important questions remain about what will replace the real estate sector as the growth engine for China’s economy in the medium term, if not now,” she wrote.

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