This page has been archived and commenting is disabled.

Mindblowing Fact Of The Day: China Has Over 52 Million Vacant Homes

Tyler Durden's picture




 

Over 1 in 5 homes (with $674 billion of mortgages) in China stand empty... and if you think that urbanization will fix that, as WSJ reports, a 10 percentage point rise in the urbanization rate (already at 54%) would result in only a 2.6% drop in vacancy rates. China has a major over-supply issue thanks to property developers who had rushed into the market to build homes, which have been a popular investment as prices seemed bound to keep rising. But now, as Vanke recently warned, things are changing and "the golden era" of China's property market are over. The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013 and as new home prices are slashed to move product, a 30% drop would leave 11.2% of Chinese homes underwater on their mortgages...

52.5 million homes stand vacant in China... for context, there are 112 million total occupied housing units in the US and 18.7 million vacant...

And home price growth is decelerating rapidly...

h/t @TimOrlik

Via WSJ,

More than one in five homes in China's urban areas is vacant, and a current housing-price correction is putting additional pressure on the owners of such empty properties, according to a nationwide survey by researchers from China's Southwestern University of Finance and Economics.

 

The vacancy rate of sold residential homes in urban areas reached 22.4% in 2013, or 49 million homes, up from 20.6% in 2011, according to the Survey and Research Center for China Household Finance, which conducted the analysis.

 

...

 

As of August 2013, the amount of outstanding mortgage loans on vacant homes in China reached 4.2 trillion yuan ($674.33 billion), the report added.

 

...

 

In addition to the 49 million sold but vacant units, the survey estimated that China has 3.5 million homes that remain unsold.

 

...

 

Another property survey released last month by brokerage CLSA Research found that 15% of homes completed in the past five years, or 10.2 million units, are vacant. CLSA studied 609 projects across 12 cities in China, a sample that accounts for 20% of the country's GDP.

And leverage is a problem...

While most Chinese cities have shown only mild home-price declines so far, many analysts are concerned that sustained price falls could result in more homeowners holding mortgages that exceed the value of their homes.

 

The survey said that vacant homes are more likely to add to homeowners' burden and cause them to suffer a financial loss. If home prices fall by 30%, 11.2% of the vacant homes would be underwater on their mortgages, compared with just 3.3% of occupied homes, it said.

The bulls are not worried...

Property firms cite China's still-low urbanization rate—54% in 2013—as reason to continue to build. But the survey pointed out that inventory levels are too high and demand for housing stemming from new urban residents would have only a limited impact on clearing inventory.

But they should be...

An increase of 10 percentage points in the urbanization rate would result in only a 2.6% fall in vacancy rates, the survey said.

As China Vanke's CEO recently noted, (via Bloomberg)

The “golden era” for China’s property market has passed, according to China Vanke Co., the nation’s biggest developer, which is shifting its focus to homes for owner occupiers rather than investors.

 

“The period in which everybody makes money out of property is gone,” President Yu Liang told reporters May 26 in Dongguan, a southern city in Guangdong province. “Vanke will take a cautiously optimistic approach to face the slowdown and target those buyers who need homes for self-use.”

 

...

 

“He should have seen some signs since it’s indeed difficult to make money now compared with before,” said Dai Fang, a Shanghai-based analyst at Zheshang Securities Co. “Growth we’ve seen before is no longer possible and you won’t be seeing blossoms everywhere again,” he added, using a Chinese idiom to refer to the property boom seen in every city.

 

...

 

The growth in the real estate industry will slow and the phase where “whoever buys makes money” is gone...

 

New construction has fallen 22 percent and sales, including commercial real estate, have slumped 7.8 percent this year.

But still - PMIs were both above and below 50 and US equities are at record highs, so what could possibly go wrong? How can China's real estate bubble be on the verge of collapse with stocks around the world so high? (Remember 2007/8 in the US - who could have seen that coming)... shrugging off fears because Chinese property is not so levered and derivatived as US property was... think again... it is the base collateral for so much of the shadow banking system (along with endless piles of commodities) that if it goes the contagion will be widespread (as well as the fact that overseas speculative leveraged capital has flooded in to this trade and now wth weakening CNY, capital losses are growing on what was a one-way trade for years).

Still don't believe they have a problem? As a bonus, here are 10 more charts from Bank of America proving just how bad the Chinese housing situation has gotten. Pay particular attention to chart 10: domestic loans are approaching a negative print - a situation unheard of in recent years.

 

 

And that means Australia is screwed too...

 

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Wed, 06/11/2014 - 17:26 | 4846250 nuclearsquid
nuclearsquid's picture

not bad.  Much worse here.  I think another 30% drop would put 50% of our houses under water.

 

Wed, 06/11/2014 - 17:37 | 4846286 max2205
max2205's picture

I see higher highs and higher lows...oh well it's all Chinese to me. 

Wed, 06/11/2014 - 17:39 | 4846290 Publicus
Publicus's picture

These houses are for post WW3 use.

Wed, 06/11/2014 - 18:27 | 4846385 Missing_Link
Missing_Link's picture

No, they're for after Yellowstone erupts.  Not kidding.

 http://www.theepochtimes.com/n3/662805-yellowstone-volcano-eruption-repo...

Wed, 06/11/2014 - 20:57 | 4846911 Redneck Hippy
Redneck Hippy's picture

Wow.  Impressive.  You're so commited to doom and gloom that in the absence of anything more compelling, you're willing to bet on the super volcano theory. 

Did you know our sun is going to go supernova and blast the Earth with so much radiation that all the seas will boil off?  No kidding, it's going to happen!!!

Believe me, I know.  I'm a scientist.

Wed, 06/11/2014 - 21:23 | 4847013 COSMOS
COSMOS's picture

We got a bunch of unoccupied homes too in Detroit and other cities across the US but they dont look as nice as the new Chinese homes.  Also notice the Chinese homes are not vandalized like they are in Detroit.

Thu, 06/12/2014 - 06:25 | 4847745 GetZeeGold
GetZeeGold's picture

 

 

China Has Over 52 Million Vacant Homes

 

Yeah, but they've got 53 million ghosts...I'm sure you can spot the problem.

Wed, 06/11/2014 - 19:40 | 4846589 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

yeah the long term net is positive

and in that regard, it's a successful investment.

52 million home is a bit misleading because they're not 'homes' per se

they are homes no more than shares in a company are real ownership

chinese buy and sell apartments like we buy stocks. being empty is of little concern as long as they're not underwater on their loans and the net long term value is still higher than what they paid.

i think most Chinese rather own "empty homes" today than, say, American stocks in 2008, for example -- at least it's something tangible with built-in demand. i mean, even if the economy crash, ONE DAY that investment will be worth something higher because sooner or later the billion people in China will need those homes.

sure a lot of people will go underwater and crash if housing crashes but i'm not trying to say everything will be already for everyone. what i'm saying is it won't change the mindset of chinese buying homes and gold.

homes can crash 50%... gold could crash 50% ... chinese will still think homes and gold are a better real investment than stocks.

 

i say this all anecdotally from personal experience, not professionally. so i may be off but this is the genuine feeling of people i know or am now family with. so i'm not saying what is right or what will happen for sure... but this is what they think and feel and why most of chinese buy houses or even gold for that matter.

Wed, 06/11/2014 - 18:04 | 4846332 SmittyinLA
SmittyinLA's picture

in CA more than 50% are underwater, and that's with current ZIRP bubble prices

Wed, 06/11/2014 - 18:39 | 4846420 krispkritter
krispkritter's picture

Seems to me the Japanese were buying in CA and elsewhere like mad in the 90's while they were going bust at home. Then the markets here collapsed and to my knowledge they retreated, tails between legs. Now the Chinese are supposed to be sucking up properties in CA, FL, and elsewhere as their markets at home collapse.  When the markets here hit the skids again(still), it makes me wonder where all that money goes? If they are buying in cash, seems like the banks are being stiffed(which is good) and someone(at least) is making money here.  Or is RE just a big shit sandwich in those markets and will continue to be?

Wed, 06/11/2014 - 18:05 | 4846337 MarkD
MarkD's picture

I have had quite a few drinks ........ for context, there are 112 million total occupied housing units in the US and 18.7 million vacant..

Isn't that Over 1 in 5 homes vacant in USA

Or should I cool it on the vodka?

Wed, 06/11/2014 - 18:26 | 4846382 rubiconsolutions
rubiconsolutions's picture

"Or should I cool it on the vodka?"

No, I actually think you'd be a fine candidate for Secretary of the Department of Housing and Urban Development.

Wed, 06/11/2014 - 19:05 | 4846486 Cthonic
Cthonic's picture

4 million of those are seasonal vacancies, e.g. vacation homes.  Still a hefty 10%+ vacancy rate taking those into account.  Now if we look at year-round vacancies as a percentage of year-round vacancies + rentals, you're talking 25% vacancy rate, or 1 in 4.  Good times.

Wed, 06/11/2014 - 19:37 | 4846604 Son of Loki
Son of Loki's picture

"Vacant" is such an empty word.

Wed, 06/11/2014 - 23:08 | 4847277 Overflow
Overflow's picture

We beat that figures in Spain, proportionally, by far.

 

CHINA:  population 1350M  52M empty homes,  ratio 0.038  (empty houses per capita)

SPAIN:  population 42M  2M empty houses,  Ratio 0.047

Wed, 06/11/2014 - 17:28 | 4846252 TeamDepends
TeamDepends's picture

Confucius say, he who invest in China ghost home no better off than chump who buy 200 sq. ft. Bay Area cracker box.

Wed, 06/11/2014 - 17:42 | 4846267 sixsigma cygnus...
sixsigma cygnusatratus's picture

This can only affect Chinese investment in foreign real estate in a positive way (if I am to believe my realtor).  Like in Canada, Australia, California, London, New York, etc.../s2

 

Confucius also say tight pants like cheap hotel -  no ballroom.

Wed, 06/11/2014 - 19:24 | 4846552 newbie vampire
newbie vampire's picture

"This can only affect Chinese investment in foreign real estate"

Especially if they need to sell in a hurry to cover their negative home-based real estate.

Shanghai calling all Chinese investors, Sum ting wong

Wed, 06/11/2014 - 17:37 | 4846283 JenkinsLane
JenkinsLane's picture

There's never been a better time to buy in sunny China!

Wed, 06/11/2014 - 17:28 | 4846255 orangegeek
orangegeek's picture

how is this surprising?  communism fails as has always been the case - no exceptions.

Wed, 06/11/2014 - 17:33 | 4846272 yrbmegr
yrbmegr's picture

Still waiting for China to fail.  Maybe after they become a superpower?

Wed, 06/11/2014 - 21:02 | 4846927 Redneck Hippy
Redneck Hippy's picture

If China is communist, then I'm Elvis Presley...

Karl Marx would recognize nothing in red China.

Wed, 06/11/2014 - 17:32 | 4846269 Itchy and Scratchy
Itchy and Scratchy's picture

Sounds like a great chance to start one helluva a big REIT!

Wed, 06/11/2014 - 17:32 | 4846270 Caviar Emptor
Caviar Emptor's picture

Yes. We don't have unused homes, just trillions in debt and a few mega mansions.

Wed, 06/11/2014 - 17:44 | 4846277 Rainman
Rainman's picture

I can't decide .... it's either China or the Eurozone that will bring this whole shitshow down dominoe style  . I go back and forth 

 

Wed, 06/11/2014 - 18:04 | 4846339 Jam Akin
Jam Akin's picture

Or maybe it will be door number 3...

Wed, 06/11/2014 - 18:06 | 4846341 BrosephStiglitz
BrosephStiglitz's picture

Yes.  Because the US and Japan have such strong fundamentals too ;)

Wed, 06/11/2014 - 17:36 | 4846281 JenkinsLane
JenkinsLane's picture

Sounds like the perfect time to introduce a 3x short China REIT ETF. Or, better yet, a 3x short China REIT ETN.

Wed, 06/11/2014 - 17:39 | 4846291 blindman
blindman's picture

an "economic" (fascist) miracle and the prices rise.
this site s ifecte,
.
Nick Lowe performs "Peace, Love and Understanding" in Studio Q
http://www.youtube.com/watch?v=3ywceG6onqg

.

New York Cardinal John O'Connor Was Jewish But Didn't Know It, Sister Says
Wednesday, Jun 11, 2014
http://www.nbcnewyork.com/news/local/Cardinal-John-OConnor-Jewish-Archbi...
.
gofigure ,

Wed, 06/11/2014 - 17:45 | 4846300 Winston Churchill
Winston Churchill's picture

I used to play cricket with a half caste Welsh jew named Dennis Davis, so why not.

Wed, 06/11/2014 - 17:59 | 4846325 blindman
blindman's picture

many a Irishman and all others went off into slavery
and adoption to piece together a life of some kind.

Wed, 06/11/2014 - 18:04 | 4846334 Freddie
Freddie's picture

Nick doing Cruel to be Kind with DarylHall and the poor T Bone guy who died recently.

https://www.youtube.com/watch?v=6no9DKxJhW0

Wed, 06/11/2014 - 18:36 | 4846414 blindman
blindman's picture

this site is js... infected.
.
URLhxxp://www.zerohedge.com/comment/reply/489561/4846334InfectionJS:Pdfka-ADK [Expl]
.
Rockpile - Danish TV concert (1979)
https://www.youtube.com/watch?v=QKPqDicpzX0
.
infected .
.
InfectionJS:Pdfka-ADK [Expl]

Wed, 06/11/2014 - 17:41 | 4846296 Rehab Willie
Rehab Willie's picture

tear one down and build another.  a keyesian wetdream.

Wed, 06/11/2014 - 17:54 | 4846316 lasvegaspersona
lasvegaspersona's picture

meh, Bills Gates could buy Boston AND those houses in China.

Wed, 06/11/2014 - 17:59 | 4846324 SmittyinLA
SmittyinLA's picture

they have 1.2 billion people, most live in factory dorms, of those Chinese that do buy homes in Aus & CA 70-80 % pay all cash, I bet the numbers hold for Chinese home buyers in China too, the crater expose for Chinese homebuyers is nil, the developers, another story, with China's slave wages they're OK too.

Wed, 06/11/2014 - 18:05 | 4846336 Kirk2NCC1701
Kirk2NCC1701's picture

Solution: Send US inner city bros there.  Soon houses be gone, look like 'Detroyit', bitch.

Was that too 'truthy', even for ZH?

Wed, 06/11/2014 - 19:18 | 4846536 shadescale
shadescale's picture

 Actually, we do have a surplus of 3rd world border-jumpers at the moment....

Wed, 06/11/2014 - 19:29 | 4846570 newbie vampire
newbie vampire's picture

"Actually, we do have a surplus of 3rd world border-jumpers at the moment...."

Give 'em the red carpet treatment and a 1st class ticket to China and Japan.

Wed, 06/11/2014 - 18:06 | 4846342 Larryonlineforex
Larryonlineforex's picture

Hey there's a shortage in the South of Englsnd who's going to sell some there first.And I thought Spain was bad with 1 million empty houses.

Wed, 06/11/2014 - 18:07 | 4846344 Jam Akin
Jam Akin's picture

There are still a lot of construction sites with tower cranes around China today, though the level of activity on these sites seems to be much lower than in past years.

Wed, 06/11/2014 - 18:09 | 4846346 nosoeawe
nosoeawe's picture

when will the banksters forelose on the white house and kick the free loading, community jihadists back to kenya?

Wed, 06/11/2014 - 18:25 | 4846374 Larryonlineforex
Larryonlineforex's picture

Maybe that's why I've been offered some Chinese mortgage backed bonds No doubt the Western Bankers will somehow have the risk and pess it on to the tax payers

Wed, 06/11/2014 - 18:26 | 4846376 JuliaS
JuliaS's picture

The vacant units offer a good incentive for potential overthrow of the government as well as elimination of corrupt speculators currently in possession of empty units. All that's needed is a good'ole CIA-funded kickstarter.

At least they have assets worth fighting over. Here in the US? Not so much. We still have land, but I doubt most would have any idea what to do with it. Look at Detroit. Plenty of land. No takers.

Wed, 06/11/2014 - 18:37 | 4846416 Bemused Observer
Bemused Observer's picture

Umm, if 1 in 5 houses are vacant, you should be able to trade them for cigarettes at this point. But the prices will just NOT be allowed to adjust to demand, will they? The owners of that property cannot be allowed to take a loss, can they?

Same shit here.

Wed, 06/11/2014 - 18:52 | 4846449 NoPantsSpongeBob
NoPantsSpongeBob's picture

Wait, yet the Chinese are buying up Detroit?

http://www.zerohedge.com/news/2014-05-06/will-detroit-be-first-major-chi...

 

From bad business decision to worse..

 

Wed, 06/11/2014 - 19:18 | 4846535 blindman
blindman's picture

natural gas play for the future.

Wed, 06/11/2014 - 19:43 | 4846624 Son of Loki
Son of Loki's picture

Even if they pay 'mostly cash' for those houses and 'feel better owning them then stocks" it is an empty feeling when the value drops 50% and that is your #1 investment or life's savings.

Stawks, houses or whatever ... if it's overpriced, it's going to hurt when it corrects or reverts to it's unmanipulated value. Worse yet, RE is extremely illiquid.

Plus, the transaction costs [buying and/or selling] a house are huge...6-10% on the way in and 6-10% oin the way out.

"To each his own," I guess. But I'd stay away from overpriced anything.

Wed, 06/11/2014 - 20:26 | 4846800 laomei
laomei's picture

Yet another article that fails to understand the very basics of real estate in China.  People own multiple homes for many reasons, it's not a crazy thing.

Example:  We own an apartment of convenience for normal living.  A small apartment in the city for access to a good school.  Another "investment" apartment which we rent out.  And a villa in the suburbs for rest and relaxation when we need a break from the city.  We also own a small aprtment in another city for residency purposes.  This is not unusual.  Most of these "empty houses" were bought back when it was all cheap.  And a good portion of the empty houses are from people who upgrade and do not want to sell due to properties being old and slated for demolition, which means payouts... in which case, you are fucking retarded to ever sell them, as you'll lose out big when compensation payments are handed out.

 

In the US you can rent and be fine, not so much here.  If you want to have official residency that means a damn, you must own a home.  If you want a larger home, yet retain access to the convenience of the city, you need another second home.  Simple simple simple stuff really.  If you are a student who comes from the countryside and gets into a good college in a large city, your residency is transferred on a temporary basis.  To retain that status, you must either get a job at a large company that can sponsor you, or you get a home to which you can officially transfer the temp residency to.  There's the demand.  Prior to marriage, it's expected to own a home, it will generally be small.  After a kid comes along, everyone upgrades, but few will sell the original apartment.

 

Furthermore, "vacancy" on new apartments is meaningless.  After furnishing and decoration, there's typically a 1-year airing out period to get all the chemicals and odors out before anyone actually moves in.

Wed, 06/11/2014 - 21:50 | 4847101 homiegot
homiegot's picture

I find your society terrifying.

Wed, 06/11/2014 - 22:55 | 4847288 Rollingroller
Rollingroller's picture

Thank you for clearing up some of the misconceptions that circulate here on ZH.

Wed, 06/11/2014 - 20:39 | 4846854 Karaio
Karaio's picture

Most of these homes are built with reinforced concrete and not difference of U.S. homes with wood and plaster.
hehe.
Another thing:
Brazil is BRICS, Australia's "pivot", China still need a lot of steel over bridges, railways and highways, submarines, ships etc. ...
Do not make steel without coal, remember this.
Also do not do unleaded ammo, also remember this.
Do not make no steel pipelines and coal.

Wed, 06/11/2014 - 20:58 | 4846915 Karaio
Karaio's picture

That's always been my fear.
Extremely obese people without sense of reality.
Maybe a little hungry awaken the spirits ....
I honestly believe that the U.S. has already passed the point of return, is like a heart that expands and contracts involuntarily before expiring.
History shows this perennial constant.
The next .... Approach .....
hehe.

Wed, 06/11/2014 - 21:37 | 4847058 homiegot
homiegot's picture

Send the border rats there. Problem solved.

Wed, 06/11/2014 - 21:59 | 4847126 studfinder
studfinder's picture

Do they pay property taxes in Chinese cities?   That's the killer here in Wisconsin.  We get boned.   You don't own shit.  No pay tax, government send local PD and evict your ass... 

Wed, 06/11/2014 - 22:35 | 4847238 Never_Put_Down
Never_Put_Down's picture

They're preparing for when Tokyo and the rest of Japan has to evacuate after the next catastophe at Fukushima, or maybe because of a Yellowstone eruption, or perhaps an alien invasion, or all of them.

Wed, 06/11/2014 - 22:48 | 4847273 user2011
user2011's picture

China is building enough houses for the whole world.   Unfortunately, the house owners ( corrupted government officials ) won't let people live in them.   They try to hide their ill found wealth by buying and building houses.   

Wed, 06/11/2014 - 23:07 | 4847308 Overflow
Overflow's picture

We beat that figures in Spain, proportionally, by far.

 

CHINA:  population 1350M  52M empty homes,  ratio 0.038  (empty houses per capita)

SPAIN:  population 42M  2M empty houses,  Ratio 0.047

Thu, 06/12/2014 - 07:49 | 4847822 AdvancingTime
AdvancingTime's picture

Spain is not doing well and China is following Sspain down the shit hole.

Thu, 06/12/2014 - 07:55 | 4847818 AdvancingTime
AdvancingTime's picture

These are very expensive empty houes. Much of the recent growth in China after 2008 came from a massive 6.6 trillion dollar stimulus program that expanded credit and poured massive amounts of money into the system. This money encouraged expansion and construction with little regard as to real demand or need. Like a plane on autopilot China continued in the direction it had been on.

Now China finds itself in a credit trap. For years the people of China have had the habit of saving much of what they earn but the low interest rates paid at banks has not rewarded savers. With few investment options much of this money has drifted towards housing and driven housing prices sky high. The economic efficiency of credit is beginning to collapse in China and the unwinding of China’s giant credit spree could be very painful. More in the article below.

http://brucewilds.blogspot.com/2014/03/china-and-great-credit-trap.html

Thu, 06/12/2014 - 20:18 | 4850898 o2sd
o2sd's picture

Hmmm, it seems the chart bullshit has reached new lows. These are % change charts. Look at chart #3. Prices in Tier 1 cities are now only growing at 20%!!! OMG! Time to panic.

Wake me when chart #3 looks like chart #10, then I will short Fortescue Metals.

 

Sat, 06/14/2014 - 01:05 | 4855943 Factotum
Factotum's picture

And this country, this well run country, that has poisoned its environment, along with the kleptocracy that is Russia, and the dysfunctional states of Brazil and India are, according to you, going to form a coallition to challenge the US with their improved banking and trading system based on gold.   Seriously, what do you guys smoke around the office?

Do NOT follow this link or you will be banned from the site!