Why 50 Million Chinese Homes are Empty
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Why 50 Million Chinese Homes are Empty


This video is sponsored by Skillshare. The first 500 people to use the link in the
description get their first two months free. Deep, in the mountains of Austria, lies the
small, but scenic town of Hallstatt. But this isn’t that, It’s an exact replica,
built 9,000 kilometers away, near Hong Kong. Austria. China. It’s home to European architecture, Chinese
cuisine, and all the traffic of… North Korea. Because, during the day, it may be the wedding
photo capital of the region, But after the sun sets, its cottages become
remarkably quiet. China’s lookalike towns, of places like
Paris, Berlin, London, and Jackson Hole, Wyoming, aren’t alone. In many places, across China, there are far
more houses than there are people. Long rows of apartments, even entire cities,
sit completely, or mostly empty. In total, approximately 50 million units,
Or 22% of China’s entire urban housing. But this doesn’t mean they aren’t being
bought. Because, they are. Like crazy. Ten years ago, most people were, as you’d
expect, buying homes for the first time. Today, it looks like this. Second homes are the majority, and people
are buying almost as many third homes as first! These aren’t cheap, either. In Los Angeles, the price per square foot
is $633. In Shenzhen, 805. And, close your eyes, because you don’t
even wanna know the price in Hong Kong. Now consider the difference in wages. The average annual income in Shenzhen is around
7,500 US Dollars, compared to 60 thousand in LA. Something clearly doesn’t add up. People in China are buying homes like Americans
buy… cars, But they’re leaving them empty, And it’s not clear where the money is coming
from, or why they’re being built. The usual explanation is that China’s government
is so desperate for economic growth that it builds bridges to nowhere and houses to…
look at. But that’s only one part of a much bigger
story. China’s troubles begin with its political
system. The Central Government is the highest level
of its only party. Here, laws are written and the fate of the
nation, decided. Beijing is THE ultimate authority. It appoints everyone from secretaries to governors,
and isn’t afraid to move them around should any one official gain too much influence. BUT – it would also be a mistake to see China
as one, singular power. Because below the central government is a
network of local divisions: 22 regional provinces, 4 municipalities, 4 autonomous regions, and
2 Special Administrative. Under those are over 300 prefectures. Followed by the less important counties, townships,
and villages. Now, just as Californians have different concerns
than do Texans or Floridians, China is a big country, and the interests
of a coastal exporter like Shenzhen are very different than those of, say, a more independent
region like Inner Mongolia. The same is true for different levels of government. While Beijing writes the rules, cities apply
and enforce them. Often, very differently. And there’s one, awkward little detail:
Cities receive just 40% of tax revenue, but are responsible for 80% of their expenses. So, naturally, they need another source of
income. And this is where things get interesting. In China, rural land is collectively owned. Everyone, and also no-one, owns it, which
means it can’t be the location of a new luxury apartment. But luckily for cities, they have the power
to rezone land from rural to urban, which can be developed. In other words, they own a money printing
machine. Watch this: First, a city buys cheap, rural
land, Which it then redefines as urban, And finally, sells to developers at its now, much
higher, price. Like. Magic. Over, and over, and over, again. Cities get much-needed cash, and developers
build housing like it’s nobody’s business. Now, unlike states in America, local governments
here are generally forbidden from taking loans. But, again, there’s a loophole. Cities can create a Local Government Financial
Vehicle, which is a fancy way of saying, a state-owned company. And by “giving” it that new urban land,
the “company” can do what the city legally can’t: borrow money. Which, they can use to build roads, schools,
and, on occasion, replica Austrian towns. This is so effective that, in some years,
land sales account for 40% of local government revenue. Plus, all this construction increases GDP,
which just so happens to be the way officials get promoted. It’s a perfect system. At least, until it’s not. If, or, when, housing prices fall, so does
city revenue. And, all those loans probably won’t magically
disappear. Beijing wants to avoid a housing crisis, but
cities just want to survive, and governors, get promoted, which puts the two at odds. Eventually, cities start running out of land
to sell, and have no choice but to build more. Like this one, which spent 2 billion dollars
blowing up the tops of mountains. Those developers who purchase that land, by
the way, are required to use it, which leads to many, often quickly-constructed, low-quality,
houses. And that brings us to the second question:
why are people buying them? And doing it like their life depended on it? Well, for one, because it kinda does. Thanks to the famous One Child Policy, China
now has the entire population of Canada more men than women. And that means fierce competition for marriage. Men are expected to own at least one property
before even being considered. It’s one of the most important elements
of social status. For many, real estate isn’t just an opportunity,
it’s a downright social necessity. Because of this, friends and family pool money
together to help buy homes for their children. And that’s how, nearly everyone, in a country
with the per capita GDP of the Dominican Republic, can afford some of the most expensive homes
on the planet. The other big factor is that Chinese citizens
Save. Like. Crazy. When it comes to saving money, there’s China,
and then there’s basically everyone else. Where, Europeans put 4 percent of their disposable
income in the piggy bank, Chinese drop nearly 40! The problem is, where can they put it?. China’s domestic stock market is just too
risky, And its banks are often seen as unpredictable. Which makes real estate a Chinese investor’s
best friend. It alone accounts for 70% of all household
wealth. It also doesn’t hurt that property tax is
a beautiful 0%. When taxes are only paid upfront, why wouldn’t
you buy as soon as possible, and just sit on it? Put all this together, and you have a recipe
for extreme house buying. An amazing 90% of homes are owned by their
residents. Europe and the U.S., stand at 69 and 64%,
respectively. And while we’re on the subject of crazy
high numbers, Ninety-four percent of Chinese millennials who don’t already own, plan
on buying in the next five years. What else do 94% of people agree on? Not even China can quench this thirst for
real estate. Despite laws against it, billions of dollars
flow out of the country every year into foreign property. It’s so common in places like Vancouver,
that, earlier this year, it introduced a 20% tax for foreigners. The irony is that while cities like Beijing
and Hong Kong have so little room, people are forced to sleep underground, these 50
million homes can’t find renters. So, hey, if you live in California, I think
I may have found an escape plan. Anyway, not only are these homes bought without
interiors, literally just concrete walls, but they’re also usually located outside
city centers, where there aren’t as many jobs. Now, the assumption in all of this, is that,
eventually, people will come, And speculation will become reality. The Eastern side of Shanghai, for example,
was once laughed at by Milton Friedman for being totally empty. Today, as a financial capital of the world,
with a GDP of 400 billion, we can pretty safely say it’s proven the haters wrong. China is in the process of migrating 300 million
people from country to city, And, of course, they’ll need a place to live. Inevitably, many of these cities will spring
to life. That doesn’t mean everything is peachy. A few things are decidedly not peachy. First, remember that the vast majority of
empty homes is expensive, commodity housing. These are not the kinds of places you buy
coming from a farm in the country. And second, all these homes have an expiration
date. In China, a building can be owned, but the
land beneath it can only ever be leased – from the government, for 70 years. After that, it’s anyone’s guess whether
ownership will be renewed. And if so, for how much. But, the truth is, 70 years is pretty optimistic… Think about it this way: If construction is
good for GDP, why build once, when you can build and re-build every few years? It’s kinda like the iPhone, if you’d like
to upgrade every year, Apple will happily sell you a new phone. It’s certainly not judging. Except, in the case of China’s housing,
developers are incentivized to make short-term bets, they know their homes will only last
a few decades anyway, which means using lower quality materials. Meanwhile, cities continue taking loans and
housing prices continue rising unsustainably. Of course, Beijing knows all this. It’s aware of the bubble, the risks involved,
and it knows more or less how to fix it – some combination of slowing down lending, reining-in
local governments, and introducing a property tax, like Shanghai. The problem is, real estate is so intertwined
with its GDP, that any of these solutions would seriously risk slowing down its economy. In the coming decades, the world will watch
as China does its best to carefully balance its enormous challenges with its relentless
desire to grow its economy and realize The Chinese Dream. As Beijing prepares for economic change by
diversifying its revenue, You and I should do the same. Today’s sponsor, Skillshare, helps you learn
new things so you can do just that. If you’re still watching this, it’s clear
that a) You like learning things and b) You learn visually, which means Skillshare’s
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in the description get 2 months completely free. Thanks to Skillshare for sponsoring this video
and to you for listening.

About Ralph Robinson

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100 thoughts on “Why 50 Million Chinese Homes are Empty

  1. It's almost as if having the powerful play with things people need to live is an awful thing we just let happen. We all live enslaved by rents or mortgages, the only difference is how badly. ABOLISH THE HOUSING MARKET NOW

  2. India too saves a lot, why was it not on the list with 30% of household savings on average. My father for example has 3 2BHK apartments as well as 2 plots of land in the city areas while we ourselves live in a Bungalow provided to us by the govt. because my father is a civil servant. Thats the kind of savings middle to high class people in India do and the thing about property giving you respect and status is true for India too. For rural people, when they want to get married, they are usually asked how many acres of land do they have. In urban areas they usually ask if they have their own home.

  3. N here's india, where 50million ppl r without homes…more than that actually…but that housing bubble burst is gonna be bigger than 2008 one…way bigger…

  4. Firstly, every country does this – in one form or another. The Federal Gov. does not fund all the expenses of the States – this means States levy taxes property, employment, petrol etc etc etc, to make up for the shortfall. Secondly, there are over 100M millionaires in China – that is their middle class is growing rapidly. The average income is skewed because the majority of people (there are more than 1 billions of Chinese) live in rural areas where their income is extremely low. Thirdly, the Chinese economy is still growing at least 6% and their trade surplus with the rest of the world per year, is around $350B – that is money that is fuelling increasing income (especially the middle class) throughout the country. As you correctly pointed out, at one point, Pudong was empty – now its generating $400 B in GDP. Lastly, the one child policy has been abolished, which means there is an ever growing population to absorb the surplus housing – just like Pudong.

  5. First it would be better if the source of those numbers are referenced. Second, what is happening in China is that some areas are losing people while others are gaining. For those areas gaining people, it won't take long before the empty houses will be occupied; as for those losing people, well, good luck

  6. respect friedman, respect fresh waters. but he knew nothing about planned economy and socialism. and it was why he felled in latin america

  7. Give the people jobs pay them the same wages you pay worthless politicians at least the people work and make things other people buy and use every day . Politicians should be paid minimum wage and live in government housing since they work for the government.

  8. That reminds me of the overpopulation in the age of mao. The west also lost hope for the billion poor chinese people but 2019 they are one of the mightiest countries now. You talk about this bubble? Chinese people arent that dumb you know there is a vision behind all that.

  9. bought my 4 bedroom apt in Shanghai in 1999 for 600k usd. now going for 2.2 millions usd. don't think china is cheap, that'll be your first mistake

  10. 1 billion people 🙄Chinese women seriously need to stop having kids. Have they ever heard of birth control 🙄

  11. Excellent article. This is how crazy China is and it kinda shows how unique their problems are.

  12. Hahaha, so bias! 50m in 1.4B population? What percentage is that? Try to do some videos with same topic for other countries

  13. Where do you find all this information for your videos? Bet it takes a lot of research.

  14. In the US people buy stocks. They are sitting on a piece of paper. In China, people are at least holding on to some properties.

  15. why people put their money on properties? let me tell you the truth. because in 30 years ago Chinese didn't even have the concept of buying a property. and in 30 years, a property value from 0 to a few millions. tell me when you considering your future will you at least consider put your money on a crazily increasing property? and will you worry you are going to miss the last chance of buying your own property? some suburb area will become busy town just because a subway line is passing there. some peasent become millionaire simply because the government plan to develop that area and buy their land. no one can resist this.

  16. People Continue to Underestimate China. It will be their Undoing If the West was smart they would learn from history.

  17. I just rent a shop in bucheon city South Korea for 680 dollars per month and the Chinese owner bought then shop 370,000 dollars ! Can u believe it ?

  18. I am a chinese here. Hey. There isn’t enough diversity with more people being men and little being women.
    Most people also want to live in the big city like in Hong Kong and in Shanghai. Lots of people are working for a few days and then go back home. China also needs to have a better government system. You aren’t allowed to go against the rules or you would be arrested because the rules came into place because of North Korea. Hint King isn’t part of them the main Chinese government. They have different.

    China does want to take over Hong Kong, but they have a more of a European and Chinese and it was built off of the foundation of Europeans. China sold Hong Kong to Europe during World War II

    also, the government makes money off of how many buildings and houses they have. They are trying to pay off their debt. They are building to make more money so that they can attract more people, but there are not enough people to live in the houses and apartments.

    As I said before, most of the big cities are populated.

    The replica cities in Hong Kong were built by Europe when they bought Hong Kong.

  19. You can't prove it by simply saying it. The reason for 1 child alone is because they are overpopulated. So prove it. Or shut up.

  20. People who bought several homes in China don’t live on regular documented salaries, they have gray incomes. Salary is nothing compared with other income. But most American workers only rely on salaries.

  21. People who bought several homes in China don’t live on regular documented salaries, they have grey incomes. Salary is nothing compared with other incomes. But most American workers only rely on salaries.

  22. President for Life Winnie the Pooh( Xi Jingping) is headed for a fall,his failure to crack down on Hong Kong has lost him face in a big way,and eventually he will have to use the PLA or step aside for someone who will.

  23. The cities don't sell the land to you. They sell you a 70 year lease. You buy the building but not the land. The Government owns all the land in China. These buildings are falling down all over China. They are no habitable after just a few years. This bubble just like the stock market bubble will be crashing very soon. China will blame the US and on to the next bubble.

  24. New empty house's, City's to Nowhere WHY? It's because china Props Up its economy and IT WILL FALL as the US did under President Obama (Not Obama's fault)

  25. All this debt need Chinese young men to pay back, but now there are no such more young people, while more and more retired, it the crucial problem that may lead to recession of Chinese economy.

  26. So if you extrapolate the logic from this video to the global market, it seems that Chinese social trends + lack of stable savings at home is why they're flooding the real estate markets in other countries, making the market less accessible to its own citizens.

  27. With the one child policy existing up until 2015, the effects are way more compounded. You will have those born in the 80s and after who are single children inheriting up to a half dozen properties. The people most in need of housing, the migrants can’t afford these houses and more importantly cannot even legitimately purchase them due to the hukou policy

  28. The good thing about one party system is that they can force anything to happen, they can easily relocate schools, hospitals and government offices far away from the downtown and make a ghost town into a new city. Which is exactly what happened recently near Beijing.

  29. This is premeditated. They grew infrastructure before population. Those empty cities are to house immigrants.

  30. Yup. And so the death of China is coming soon – (to be expected of a severely corrupted system.)

  31. No worries, young people gets married and move out looking for houses. And this year government already called off the new real estate investment and development. Recent years more satellite city model will get people to relocated from big cities rescue the ghost town. That replica Austria town situation will be discouraged as well. Western architects is a Disney land for Chinese who can't travel overseas but want to experience some western Element. All the desire is coming from Western cultural invasion by pop media. It made Chinese culture disappears. It's very sad. I hope china find a healthy balance in between. I also hope western fashion brands can get inspired from the ancient Chinese patterns stop running Ads full of tacky logo trend.

  32. President Trump…………..FORGET the Tariffs on China……………
    Here is housing for the 500,000 homeless in USA………….
    please sent the USA homeless to China………..

  33. That data was based on very old and outdated numbers, it's actually over a hundred million vacant homes in dozens of vacant cities.
    And most of those homes are now being demolished because they have aged and falling apart, trillions of dollars from the Chinese people being thrown away on a pipe dream that those properties will all be occupied by 2024. Xi fleeced his people that's for sure. It's not happening.

  34. If you think for one step more, you will see that when everyone is working on their house loan… no one will give a s**t on human right or other stuff. we only care about MONEY! finally, peace everywhere inChina…

  35. China's homeowner rate is 92% compaired to the USA 60% – they dont build bridges to nowhere or pointless roads, look into the £1.5 trillion belt road initiative and cities along the route they are building, they are planning for the future whilst they take over the USA as the worlds dominant powerhouse and re routing trade routes to China making it easier for the world to buy their products.

  36. When I was six years old,My biggest wish is to see the lights on during the New Year,

    When your children are playing on the computer,We were still pulling weeds by hand in the fields,

    But today, I am very happy to enjoy life,I even have time to talk to you.

    When you're talking about how our government evil ,

    Do you realize how ridiculous it is for us to see your political parties fighting for their own interests,

    Who the hell is in the wall? Who in the wall.

  37. You understand and present this topic better than 90% of the people and MSM making videos about the "China Housing Bubble." @poly_matter

    Affordable housing is pretty tightly restricted but apparently "commodity housing" functions as revenue for the municipalities that isn't a tax. So the munis or cities or smaller government subdivisions rezone rural territory and sell it to developers and they get to keep the money. Normal tax revenue is subject to a significant cut going to the central government ( … I believe in 40% to 80% range if the Wikipedia article is accurate).

    As China Uncensored always says, China has very few outlets to invest in, and Chinese people are big savers so these bloated government housing projects often do actually get inhabitants and get used down the line for people's kids and grandkids to live in.

    As to whether it's the crazy bubble that casual observers like to exclaim? It's a distortion in the market to be sure, but to be fair so is any tax or government policy. I think it's a sign that Chinese financial markets and banking and lending and taxation system wants a lot of advancement, it's not the sword of Damocles that judgemental looky loos proudly announce, as if they understand markets simply by living in a country with functional financial centers.

  38. That's why in my country, even the natives with chinesse decendants (100 years roots of family) avoids any contractors that comes from China (mainland or even taiwan), and only bought from.local contractors. It is well known how shitty their building are. Bad investment! Often only in 10 years, the building turned so bad, only the land worth anything.

  39. Why 50 Million Chinese Homes are Empty

    Literally the top recommendation: Why China is Building the World’s Biggest City
    Mess of a country.

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