The “Nightmare Scenario” For Beijing: 50 Million Chinese Apartments Are Empty

Sunday, November 11, 2018
By Paul Martin

by Tyler Durden
ZeroHedge.com
Sun, 11/11/2018

Back in 2017, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth would keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing as three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US, with the remainder invested financial assets.

Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble, hoping that the popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process. For now, Beijing has been successful in maintaining price stability at least according to official data, allowing the air out of the “Tier 1” home price bubble which peaked in early 2016, while preserving modest home price appreciation in secondary markets.

How long China will be able to avoid a sharp price decline remains to be seen, but in the meantime another problem faces China’s housing market: in addition to being the primary source of household net worth – and therefore stable and growing consumption – it has also been a key driver behind China’s economic growth, with infrastructure spending and capital investment long among the biggest components of the country’s goalseeked GDP. One result has been China’s infamous ghost cities, built only for the sake of Keynesian spending to hit a predetermined GDP number that would make Beijing happy.

Meanwhile, in the process of reflating the latest housing bubble, another dire byproduct of this artificial housing “market” has emerged: tens of millions of apartments and houses standing empty across the country.

According to Bloomberg, soon-to-be-published research will show that roughly 22% of China’s urban housing stock is unoccupied, according to Professor Gan Li, who runs the main nationwide study. That amounts to more than 50 million empty homes.

The Rest…HERE

Comments are closed.

Join the revolution in 2018. Revolution Radio is 100% volunteer ran. Any contributions are greatly appreciated. God bless!

Follow us on Twitter