Owned but unoccupied homes account for more than a fifth of China’s urban housing
Speculative Chinese investors own more than 65 million housing units that they do not intend to occupy or rent to tenants
China has millions of unsold homes in so-called “ghost cities” that were built near such large cities as Beijing and Shanghai but failed to attract residents.
But China also has tens of millions of housing units that have been sold, many of them to speculative investors who are not planning to occupy or rent them out.
Emory University economist Kaiji Chen, who analyzes the Chinese housing market, calls these sold but vacant housing units “ghost apartments.”
They comprise more than a fifth of all urban housing in China, according to a housing survey conducted by researchers at Southwestern University of Finance and Economics in Chengdu.
The nationwide survey results show that more than 65 million homes are owned but unoccupied, and not all of them are in “ghost cities.” According to the survey, “ghost apartments” are most prevalent in second-tier and third-tier Chinese cities.
In 2017, mortgage debt on vacant housing units totaled 10.3 million yuan (approximately $1.5 billion), or nearly half of all mortgage debt in China.
Driving the trend is speculative faith that “ghost apartments” and the land beneath them will rise in value, according to Chen.
He says speculation in real estate is a longtime issue in China, where limits on investing in foreign countries sustain a widespread belief that buying domestic property is the best way to store wealth. Many Chinese entrepreneurs have earned higher returns on investments in housing than in their own businesses.
Purchases of second homes accounted for 44 percent of all home purchases in China in 2018, up from 27 percent 10 years ago, and purchases of third homes increased over the same period to 25 percent of the total from 3 percent, according to Bloomberg.
The trend has raised residential property prices and rental rates and has limited the ability of younger Chinese citizens to buy their first homes. Residential property prices in China have increased at almost double the rate of disposable income, Chen told City Lab.
Restraining the rise in housing prices has been a top priority of the Chinese government, which has responded by limiting the number of homes in congested cities that a family can own, raising mortgage interest rates and increasing required down payments for mortgage loans. [City Lab] – Mike Seemuth