Are China’s Ghost Cities Filling Up?
What is the “ghost real estate”?
The ghost real estate means that the buildings are already built, but no one moves on. The cities with such buildings are called “ghost cities”. These cities often are far away from urban cities.
Why is there a phenomenon of “ghost real estate” in China?
The “ghost real estate” phenomenon in China can become attributed to several factors. The main reason is the rapid expansion of China’s real estate sector in recent years. There is also a mismatch between the types of properties being built and the demand for housing. Many of the properties built are high-end luxury condominiums or commercial properties. Thus, often unaffordable for many Chinese citizens. This has contributed to the formation of ghost properties.
Moreover, some investors buy real estate with the intention of holding it as an investment, rather than using it for its intended purpose. This leads to “rising demand” and higher prices. Furthermore, this goes back to the fact that many people can’t afford the prices. And thus, contributes to the formation of ghost properties due to oversupply of real estate. All of these may become caused by the limited housing demand. And because of the lack of jobs and the slowdown of the Chinese economy.
Are China’s Ghost Cities Filling Up?
The impact of ghost real estate in China
Some of the major impacts include misuse of resources: Mass construction of properties can lead to a misallocation of resources, with developers focusing on building properties that may not be needed rather than investing in other areas of the economy.
The presence of ghost properties can lead to a decline in property values in the surrounding area, which can have a negative economic impact on homeowners, and investors who have already purchased homes. (Decreased home values lead to decreased spending by those who have already purchased homes). Oversupply of housing: Phantom real estate can lead to an oversupply of housing, which can negatively impact the overall economy by reducing demand and increasing the risk of a housing bubble.
What is the future of Chinese ghost real estate and what policies do we have to mitigate ghost real estate?
The future of Chinese ghost real estate is uncertain because the impact of ghost properties on the Chinese economy has both positive and negative effects, depending on the circumstances.
“The degree of urbanisation in China from 1980-2022” from
https://www.statista.com/statistics/270162/urbanization-in-china/
As we can see on the above graph, the urbanisation is higher and higher in recent years.
It is often thought that with urbanisation comes the solution of urban ghost real estate. But with the growth of China’s housing prices and the decline of China’s national housing boom（figure 2）, we are not going to be bullish on inner city ghost real estate, not to mention the epidemic of sealing the cause of the entire economic downturn. “January-November, the sales area of commercial housing 121.5 million square metres, down 23.3% year-on-year, of which residential sales area fell 26.2%. Sales of commercial housing 118,648 billion yuan, down 26.6%, of which residential sales fell 28.4%” This is the data from China’s National Bureau of Statistics. So, ghost real estate is not really going to get solved.
Are China’s Ghost Cities Filling Up?
Figure 2
There are two ways that can help the future of Chinese ghost real estate.
One is to provide more jobs, and the other is to limit real estate development.
Moreover, providing more jobs will allow people to aspire to a life where they can have enough money to secure a loan to buy a house in the future. In addition, supporting small and medium-sized enterprises (SMEs) can also help create more jobs and diversify the economy.
To limit the benefits of real estate development to phantom properties in China, the government could implement policies that prioritise the development of properties that meet real needs, such as affordable housing, over speculative projects. This would help prevent an oversupply of housing and reduce the risk of generating more ghost real estate.
China, however, does not currently restrict property development across the board. However, the government took various measures to control and regulate the pace and scale of property development. Moreover, particularly in certain areas of overbuilding! In addition, speculative investment became identified as problems. For example, the Chinese government has imposed regulations on real estate development and financing, imposing stricter controls on the amount and term of bank loans available to developers. The government has also set restrictions on the purchase of real estate, particularly in large cities, in an effort to reduce real estate prices and prevent speculative investment.
In conclusion, it is worth noting that there are still areas in China where real estate development continues at a rapid pace, and problems of overbuilding and oversupply of real estate persist.
Written by Mengran Zhu
resource：
“Ghost Cities: Built but Never Inhabited.” urbanNext – May 1, 2023, https://urbannext.net/ghost-cities
https://www.cfr.org/blog/pboc-props-chinas-housing-market
Are China’s Ghost Cities Filling Up?
Are China’s Ghost Cities Filling Up?
