The title of our analysis may seem unbelievable, but there are so many vacant apartments in China as a result of the negative balance between supply and demand in Real Estate. Every year, 15 million new homes are built in China, a number five times higher than in the US and the EU.
At the same time, all these large and small construction companies will inevitably go bankrupt due to their large liabilities in loans to the banks, which loans were used to make these constructions. In this extreme case, the construction companies, over time and the lack of buyers and tenants, will be forced to “kill” these apartments that they have in their portfolios at below cost prices to reduce their exposure to their current loans.
All these vacant apartments are modern constructions, in modern cities, in modern buildings and facilities. On the one hand, China seems to have overestimated the urbanization of its population, but on the other hand, this boom in house and apartment construction has fueled China’s economic growth for more than two decades.
In 2019, the value of the real estate sector in China was $ 52 trillion and was almost double that of the United States. Today, there are empty modern apartments numbering 65 million, a percentage of 21% of available housing. In other words, 1/5 of the apartments in China are closed.
The Chinese government should encourage citizens to buy apartments in cities, albeit at low prices but above construction costs. Otherwise, the construction companies will go bankrupt and the apartments they will have in their portfolios will then have to be passed on to their creditors (banks), who will auction them off at the lowest possible price to get their funds back.
