Why 50 Million Chinese Homes are Empty

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
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100 thoughts on “Why 50 Million Chinese Homes are Empty

  1. waiting for it… oops…

    "pops"

    people in China regret about buying houses😂

    Thats why china need to block their ppl from accessing the outside world, to make them more willing to pay for the BUBBLE.

    btw, the officials in China need to appreciate the people for working so hard to send their siblings to Europe and USA.

    But they won't, they only kill the people who don't like to work to pay for the bubble, they want all ppl to fall into their traps.

    It is perfectly fine to love China, it is just kinda hilarious that ppl love the communist party also🤣

  2. I think the housing bubble is going to burst very soon and the government will be in trouble when it is time to pay the piper. I have seen videos where the cities which is ghost towns are already falling apart due to poor building practices by contractors in China. In 5 years those cities with all the fancy buildings need to be torn down and new ones put up in their place due to that fact.

  3. But what EXACTLY is the Chinese Dream?
    The American Dream used to involve a wife, 2.2 kids in a suburban house with a picket fence, a dog, and 1.5 cars.

    Now the American Dream is morphing to becoming a celebrity influencer, drive a Bughatti, and sow / harvest Mandingo / Femmedingo oats… as in have celebrity babies with below average intelligence / above average photogenics, raised by a nanny of course. Cars have become unreliable tools. The dog is an insurance liability and a target for animal rights nuts. The tax rate on the house with the picket fence is higher than what the mortgage payment used to be just 10 years ago. And the wife is probably going to tie up your testicles in a bag and demand proof of total obedience any time she lets them out.

    I supposed the Chinese Dream used to have something to do with freedom to escape the farm, marry who you wanted to (not who happened to be picked from the village gene pool by your family), secure an education for your children, and work hard at something for the satisfaction of being better off than your parents were (and to be able to take care of them in their old age).

  4. HONG KONG IS THE NEXT DEMOCRATIC FOUNDER ALL OVER CHINA NEXT GOVERMENT OF CHINA IS A DOMOCRATIC GOVERMENT .the wakeup of the giant .

  5. Long story short, I will save you 12 minutes of your life. Why are 50 Million Chinese Home empty? Because they are not actually used to house the people, but they are bought up by speculators who want to make money either off capital gains or renting. The main purpose of homes (like in many places in the world) is not fulfilled here and that is: houses are for living in it, not for investing in it, not for living off rent like a freeloader.

  6. Thumbs up, this video have a very comprehensive understanding of Chinese real-estate market. Well done. I have worked in Chinese real-estate market. I have always wonder whether the balance will hold. It will be if you can share some insight on that.

  7. Own the house but the land is leased?
    Save all your money then
    gather a bunch of money from family and friends on something you’ll never fully own??

    Then finally get the house now it’s empty hoping to find a wife??

    So if you finally marry and have a son he’ll be on the same never ending cycle.
    Somethings I just can’t understand except Chinese men probably make great husbands but boy my heart goes out for to them.

  8. Communist playing Capitalism. Alike a first year medicine student trying an open hearth surgery. WHAT MUST HAPPENS ? TOTAL FAILURE.

  9. Could you imagine how many homeless people could live in those homes? There would be no homeless worldwide with that much available housing

  10. As Beijing diversifies you should do the same learn new skills from skillshare hahahaha. You every video ends with same explanation hahaha

  11. American way of selling housing units is showing blank lot without any houses built on it. They advertise and sell houses. This is called preselling method. This preselling method saves the developer of investing his money but the buyer of the house takes a lot of risk. While selling to most Chinese in mainland will require a house fully built before any serious sales agreement is discussed. Therefore preselling of American method will never work in China. Its the developer who will risk his capital and not the buyer. Besides most buyer will buy for investment only and not for occupancy.

  12. Since 1950, China has built 600 cities with populations over a million and a few have given rise to stories of ‘ghost towns’. But real ghost towns are communities that have died, while China’s empty towns are signs of approaching birth, not death, as author Wade Shepard, who has visited most of them, attests, “I’ve been chasing reports of deserted towns around China and have yet to find one. Over and over, I would read articles in the international press claiming that China is building towns that are never inhabited–only to find something very different upon arrival. The New South China Mall had a lot of empty shops but, by the time I arrived, it turned out to be a thriving entertainment center; Dantu showed me that an initially stagnant new town can become populated and come alive and I found that Xinyang’s new district, called a ‘ghost town’ since 2010, hasn’t even been built yet”.

    In 2010, all of these cities had under 50,000 population
    1. Ordos
    2. Dantu
    3. Pudong
    4. Wujin
    5. Zhengdong
    6. ZhuJiang
    7. Zhengzhou
    8. TianDucheng
    9. Lanzhou
    10.XiangLuowan

    Today they’re 90% filled. https://www.bloomberg.com/news/articles/2017-05-16/china-s-manhattan-sheds-ghost-town-image-as-towers-begin-to-fill

    Xiangluowan is full
    https://www.theguardian.com/cities/2017/mar/21/china-west-ghost-city-comes-to-life-lanzhou-new-area

    Lanzhou is full,
    http://www.vagabondjourney.com/zhengzhou-zhengdong-china-largest-ghost-city/

    https://www.forbes.com/sites/wadeshepard/2016/01/19/one-way-that-china-populates-its-ghost-cities/#681556116e53

    Zhengzhou is full
    Zhujiang is full
    Zhengdong is full

    http://blogs.reuters.com/great-debate/2015/04/21/the-myth-of-chinas-ghost-cities/

    Dantu is full
    Wujin is full

    Pudong is obviously full

    Ordos population went from 40,000 —> 2 million

    https://www.forbes.com/sites/wadeshepard/2016/04/19/an-update-on-chinas-largest-ghost-city-what-ordos-kangbashi-is-like-today/#449927062327

    The fact of the matter is that Ordos is a prefecture-level city that has a population in excess of two million.

    Wade Shepherd Video interview: https://youtu.be/T7y_ejVBkmE

  13. China should import all jobless poor people from India so that these cities can be filled and make factory nearby so they can contribute to China gdp

  14. China isn't 'relocating' rural farmers to cities. They're pushing our rural communities from where they've lived all their life and building empty cities there. Cities those poor, displaced farmers can't afford to live in.

  15. Yep, so thanks to the Chinese, many capital cities around the world are in a real estate bubble. Prices like in Sydney Australia are unsustainably high.
    Chinese even overpay for properties that would otherwise be more affordable for the locals.
    Next GFC ? Maybe

  16. Chinese communist work best for China. Look at democratic country where they force India to adopt, look at their state of living! Chinese are not stupid to adopt those fake governing party. This documentary speak english, they know nothing.

  17. From what I hear, all those empty homes are there so when The US nukes China. So the population has homes to go to. That is the only reason. Because america is posturing in the south seas. And China is ocean grabbing in the Pacific.

  18. So… the homes are built out of concrete and have nothing else in them? Its a wasteful thing to do even if its a contribution to their economy and getting people together. They should build good homes and rent them out.

  19. The Hammer and Sickle ensign is part of the USSR post-Soviet era. The Chinese communist ensign is the Star. You have been depicting the Hammer and Sickle as the ensign for China.

  20. They expected to be unable to control population growth regardless of restrictions, but nowaday are they left with an aging population and lacking new workers as well as a gender dispersity.

  21. HOW DARE the Chinese government OVER-PROVIDE housing for the people ?!! What government allocates TOO MUCH resources?!? This shows just how INCOMPETENT the CPC is, they should OBVIOUSLY have let people go homeless instead of providing houses that no one needs!

    But seriously though, many of the ghost towns are in bad locations, Chinese people prefer to live as close to the big city centers as they possibly can, and building a neighborhood in the middle of nowhere is not really attractive for most. I don't believe it's a good indicator that there is a housing bubble or an impending crash.

  22. Ah, communism. What a shitshow.
    Fucks trash their own country then come here and buy out all of our properties. Fuck off and ruin your own show. Even the signs in our fucking malls around DC are all written in fucking Chinese.

  23. Instead of trting to explain.. Read marx, Lenin etc… And learn how the Soviets implemented the first socialist state

  24. BTW China no longer has the one child law, parts of this video makes it sound as if they do still have that law, and they clearly redacted it in 2015.

  25. The sources: please tell me, what is the population graphic from 6:24 ? I used to visit this page and analyse population of the world, but could not find it recently. I also searched it through your sources, but I am miserable and failed. 🙁

  26. I have a friend in China, who is a teachers assistant and he owns three homes. Eastern China is is considerably more expensive than West. That's why the salary vs price per sq ft doesn't add up, because the disparity is huge. He told me you can buy small houses for a few thousand dollars in some areas (which is what he did).

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