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Housing Market and Urbanization
Southwestern University of Finance and Economics
Texas A&M University
Li Gan
An Introduction of CHFS1
Vacancy rates in Urban China2
The mystery of the vacancy rate3
Contents
目
Part 01
An Introduction of China Household Finance Survey (CHFS)
Coverage
2011
 40000 households
 29 provinces
 363 cities/districts/counties
 1439 communities
 8438 households
 25 provinces
 80 cities/districts/counties
 160 communities
2015
2013
 28141 households
 29 provinces
 262 cities/districts/counties
 1048 communities
12.6% 13.9%
15.4%
19.1%
35.1%
16.4%
15.2%
19.2%
8.5%
25.3%
30.7%
17.0%
Population shares of Housing Provident Fund
Official CHFS
Part 02
The vacancy rate in Urban China
89.7% 90.8% 92.7%
14.2% 16.7% 19.2%
2011 2013 2015
Nationwide
Ownership rate
Multi-house ownership rate
84.7% 87.0% 90.3%
15.9% 17.9% 21.2%
2011 2013 2015
Urban
Ownership rate
Multi-house ownership rate
95.9% 96.4% 96.6%
12.0% 14.8% 16.0%
2011 2013 2015
Rural
Ownership rate
Multi-house ownership rate
Rising Home Ownership Rates
4.4% 4.0% 4.1%
16.0% 17.6% 18.7%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2011 2013 2015
From Multiple-house families
From one-house families
22.8%
21.6%
20.4%
Vacant houses
(mil unit)
Vacant area
(bil sq m)
2011 41,140 4.43
2013 47,270 5.09
2015 54,380 6.09
Vacancy rates in urban China
17.3%
19.8% 19.8%
16.3%
21.4% 21.6%
25.0%
22.2%
25.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2011 2013 2015
Vacancy rates by city-tiers
First tier cities Second tier cities Third or lower tier cities
United Nations
Seasonal
vacancy
Vacation
Seasonal
Others
Non Seasonal
vacancy
The second house
For rent
For sale
For demolition
others
For Rent and For sale Yes for all countries
Vacation/seasonal
All countries except
Germany and Spain
The second house
All countries except
Germany and Spain
For demolition/
remodeling
All countries (including
Japan) except US
Not for living purposes
(offices, warehouses etc)
US: no
Under construction
Japan: yes
US: No
How to define a vacant house?
Shares Contributions Units (10k)
Vacation or seasonal 2.70% 0.63% 149
Long term vacant 29.00% 6.61% 1576
Occasional use 10.40% 2.38% 567
Weekend use 2.10% 0.48% 114
Work or schooling 7.00% 1.59% 378
Second houses by owner 11.70% 2.67% 637
Temporarily used by a family member 12.10% 2.75% 657
sum 17.1% 4078
Long-term used by another family member 2.90% 0.66% 158
Used by friends and relatives 6.40% 1.46% 348
Not ready for living 15.70% 3.58% 853
Not yet remodeled or in remodeling 11.80% 2.69% 641
Under construction 3.70% 0.85% 203
To be demolished 0.20% 0.04% 9
Vacancy rates in urban China
Vacancy rates
Number of vacant units
(in millions)
Current 22.8% 54.4
Japan comparable 20.7% 49.3
Most EU country comparable 20.0% 47.3
US comparable 17.7% 38.8
Different calculation of vacancy rates
12.9% 13.1%
2.7%
7.6%
6.2%
4.1%
22.8%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
US 2015 Japan
2013
UK 2015 Taipei
2014
Singapore
2013
Hong Kong
2013
Urban
China 2015
International comparison
22.6%
31.9%
13.3%
9.4%
18.9%
14.3%
32.5%
24.7%
22.6%
13.0%
10.9% 12.7%
16.8%
18.2%
25.2%
20.1%
14.3%
12.3% 15.9%
19.4%
20.5%
Commercial
Housing
Social welfare
housing
From housing
reform
Collective
funded
Self-built Demolition
replacements
Others
Vacancy rates from different sources
2011 2013 2015
2011 2013 2015
Commercial Housing 47.6% 50.4% 59.2%
Social welfare housing 3.5% 4.0% 3.0%
From housing reform 7.4% 8.2% 8.2%
Collective funded 2.6% 2.8% 2.5%
Self-built 24.4% 17.3% 13.2%
Demolition replacements 4.0% 8.3% 6.7%
Others 10.4% 9.1% 7.2%
Contributions to the vacancies
60% of vacant houses are commercial housing
Vacancy rates
in 2015
From non-
residents
From
residents
Vacancy rates
in 2013
Beijing 23.5% 3.9% 19.6% 19.5%
Shanghai 20.3% 0.8% 19.5% 18.5%
Tianjin 24.0% 1.1% 23.0% 22.5%
Wuhan 24.7% 2.0% 22.7% 23.5%
Chengdu 27.3% 1.5% 25.8% 24.7%
Congqing 24.4% 2.8% 19.0% 25.6%
Vacancy rates from new purchases are rising
33.6%
23.2%
12.6%
10.4%
12.5%
16.7%
57.2%
28.1%
16.3%
13.1% 12.9% 13.6%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
≤2 years 3-5 years 6-10 years 11-15 years 16-20 years ≥ 21 years
2013 2015
Factors related to vacant housing Marginal effect
If income doubled + 0.6 percentage points
Head one more year of education + 0.6 percentage points
With unmarried young men + 2.2 percentage points
Own businesses + 11.2 percentage points
High risk-taking altitude + 5.3 percentage points
House price rental ratio doubles + 6.1 percentage points
First house yields a double return + 0.2 percentage points
Urbanization rate increases by 10 percentage points - 2.6 percentage points
Why households own vacant units
19
4.0%
6.6% 7.6%
10.4%
14.2%
18.8%
24.2%
5.4%
17.1%
20.2%
28.0%
36.3%
42.3%
49.1%
Current Housing prices fall
by 5%
Housing prices fall
by 10%
Housing prices fall
by 20%
Housing prices fall
by 30%
Housing prices fall
by 40%
Housing prices fall
by 50%
Non-vacant Housing Vacant housing
19
A stress test reveals a substantial risk for China’s housing market
Part 03
The Mystery of Vacancy Rates
The mystery of the vacancy rate
 Most developers/government officials/researchers may disagree:
 Between 2000 and 2010, about 70 million additional families in the city.
 From 2000 to 2013: net increase 70 million units of housing
 The aggregate housing demand/supply in urban China are roughly
balanced.
 Where to find 50 million vacant units?
Completed new construction 10.4 billion sq meters
Demolition and reallocation 3 billion sq meters
Net increase 7.04 billion square meters
33.35%
36.22%
49.68%
56.10%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Urbanization rates in China
About 1.3% or about 16 million people year become urban residents.
23
Urbanization in general
 Many researchers would equalize urbanization as migrants who leave their rural
homes to go to urban areas to work and to live.
 In fact, urbanization in China is quite complicated.
 Some changed their Hukou from rural to non-rural.
 Some relocated to urban areas.
 Some never moved but their areas are turned into urban areas.
Urban
residents
Rural residents
Non rural
Hukou
Rural
Hukou
Rural to Urban
Original Nonrural
Hukou
Land
acquisition,
house
demolition
Education,
Employment
buy houses
Rural
Hukou
Nonrural
Hukou
0.9%
10 mil
8.0%
110 mil
Redefined
Migrants
Relocating
Migrants
11.1%
150 mil
9.1%
125 mil
40.2%
560 mil
2.4%
30 mil
28.4%
390 mil
Data Source: CHFS
25
Variables
Overall
demand
Rigid
demand
Upgrading
demand
Redefined migrants
(in percentage points)
-10.7 -8.1
No
difference
Relocating migrants
(in percentage points)
-7.6 No difference -4.7
Redefined migrants have less housing demand
Rigid demand: those who don’t have an apartment in the city of their living and grown-
ups who live with their parents.
Upgrading demand: 20-year old apartments
 There are more Redefined Migrants than Relocating Migrants.
 Treating these two types of migrants the same lead to a substantial
overestimate of housing demand.
 Misunderstanding urbanization is likely a cause of 38 million
overbuilt units of commercial housing in China.
26
Summary
27
Restimating urbanization rates in China
 How an area is reclassified to urban: connectivity
 An administrative village is often consisted of 8 natural villages.
 If the village center is connected to a town center:
 A connecting road is built
 Along the connecting road, most are non-farm land or buildings.
 The whole administrative village is reclassified as an urban area.
CHFS’ corrections on urbanization rates
Data sources:CHFS, NBS and local statistical bulletins
56.1
68.7
51.2
66.5
57
47.7
65.8
60.9
5.8
11.1 10.7 8.9 8.6 8.2 5.7 4.2
0
10
20
30
40
50
60
70
80
National Guangdong Hebei Jiangsu Sandong Sichuan Zhejiang Chongqing
Urbanization rates and CHFS correction
NBS Urbanization Rate Correction
Thank You!
Contact us:
pr@chfs.cn
Let China understand herself, Let the world know China.

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Li Gan: “Ghost” Towns?: Why 50 Million Housing Units in China are Vacant

  • 1. Housing Market and Urbanization Southwestern University of Finance and Economics Texas A&M University Li Gan
  • 2. An Introduction of CHFS1 Vacancy rates in Urban China2 The mystery of the vacancy rate3 Contents 目
  • 3. Part 01 An Introduction of China Household Finance Survey (CHFS)
  • 4. Coverage 2011  40000 households  29 provinces  363 cities/districts/counties  1439 communities  8438 households  25 provinces  80 cities/districts/counties  160 communities 2015 2013  28141 households  29 provinces  262 cities/districts/counties  1048 communities
  • 6. Part 02 The vacancy rate in Urban China
  • 7. 89.7% 90.8% 92.7% 14.2% 16.7% 19.2% 2011 2013 2015 Nationwide Ownership rate Multi-house ownership rate 84.7% 87.0% 90.3% 15.9% 17.9% 21.2% 2011 2013 2015 Urban Ownership rate Multi-house ownership rate 95.9% 96.4% 96.6% 12.0% 14.8% 16.0% 2011 2013 2015 Rural Ownership rate Multi-house ownership rate Rising Home Ownership Rates
  • 8. 4.4% 4.0% 4.1% 16.0% 17.6% 18.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2011 2013 2015 From Multiple-house families From one-house families 22.8% 21.6% 20.4% Vacant houses (mil unit) Vacant area (bil sq m) 2011 41,140 4.43 2013 47,270 5.09 2015 54,380 6.09 Vacancy rates in urban China
  • 9. 17.3% 19.8% 19.8% 16.3% 21.4% 21.6% 25.0% 22.2% 25.2% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 2011 2013 2015 Vacancy rates by city-tiers First tier cities Second tier cities Third or lower tier cities
  • 10. United Nations Seasonal vacancy Vacation Seasonal Others Non Seasonal vacancy The second house For rent For sale For demolition others For Rent and For sale Yes for all countries Vacation/seasonal All countries except Germany and Spain The second house All countries except Germany and Spain For demolition/ remodeling All countries (including Japan) except US Not for living purposes (offices, warehouses etc) US: no Under construction Japan: yes US: No How to define a vacant house?
  • 11. Shares Contributions Units (10k) Vacation or seasonal 2.70% 0.63% 149 Long term vacant 29.00% 6.61% 1576 Occasional use 10.40% 2.38% 567 Weekend use 2.10% 0.48% 114 Work or schooling 7.00% 1.59% 378 Second houses by owner 11.70% 2.67% 637 Temporarily used by a family member 12.10% 2.75% 657 sum 17.1% 4078 Long-term used by another family member 2.90% 0.66% 158 Used by friends and relatives 6.40% 1.46% 348 Not ready for living 15.70% 3.58% 853 Not yet remodeled or in remodeling 11.80% 2.69% 641 Under construction 3.70% 0.85% 203 To be demolished 0.20% 0.04% 9 Vacancy rates in urban China
  • 12. Vacancy rates Number of vacant units (in millions) Current 22.8% 54.4 Japan comparable 20.7% 49.3 Most EU country comparable 20.0% 47.3 US comparable 17.7% 38.8 Different calculation of vacancy rates
  • 13. 12.9% 13.1% 2.7% 7.6% 6.2% 4.1% 22.8% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% US 2015 Japan 2013 UK 2015 Taipei 2014 Singapore 2013 Hong Kong 2013 Urban China 2015 International comparison
  • 14. 22.6% 31.9% 13.3% 9.4% 18.9% 14.3% 32.5% 24.7% 22.6% 13.0% 10.9% 12.7% 16.8% 18.2% 25.2% 20.1% 14.3% 12.3% 15.9% 19.4% 20.5% Commercial Housing Social welfare housing From housing reform Collective funded Self-built Demolition replacements Others Vacancy rates from different sources 2011 2013 2015
  • 15. 2011 2013 2015 Commercial Housing 47.6% 50.4% 59.2% Social welfare housing 3.5% 4.0% 3.0% From housing reform 7.4% 8.2% 8.2% Collective funded 2.6% 2.8% 2.5% Self-built 24.4% 17.3% 13.2% Demolition replacements 4.0% 8.3% 6.7% Others 10.4% 9.1% 7.2% Contributions to the vacancies 60% of vacant houses are commercial housing
  • 16. Vacancy rates in 2015 From non- residents From residents Vacancy rates in 2013 Beijing 23.5% 3.9% 19.6% 19.5% Shanghai 20.3% 0.8% 19.5% 18.5% Tianjin 24.0% 1.1% 23.0% 22.5% Wuhan 24.7% 2.0% 22.7% 23.5% Chengdu 27.3% 1.5% 25.8% 24.7% Congqing 24.4% 2.8% 19.0% 25.6%
  • 17. Vacancy rates from new purchases are rising 33.6% 23.2% 12.6% 10.4% 12.5% 16.7% 57.2% 28.1% 16.3% 13.1% 12.9% 13.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% ≤2 years 3-5 years 6-10 years 11-15 years 16-20 years ≥ 21 years 2013 2015
  • 18. Factors related to vacant housing Marginal effect If income doubled + 0.6 percentage points Head one more year of education + 0.6 percentage points With unmarried young men + 2.2 percentage points Own businesses + 11.2 percentage points High risk-taking altitude + 5.3 percentage points House price rental ratio doubles + 6.1 percentage points First house yields a double return + 0.2 percentage points Urbanization rate increases by 10 percentage points - 2.6 percentage points Why households own vacant units
  • 19. 19 4.0% 6.6% 7.6% 10.4% 14.2% 18.8% 24.2% 5.4% 17.1% 20.2% 28.0% 36.3% 42.3% 49.1% Current Housing prices fall by 5% Housing prices fall by 10% Housing prices fall by 20% Housing prices fall by 30% Housing prices fall by 40% Housing prices fall by 50% Non-vacant Housing Vacant housing 19 A stress test reveals a substantial risk for China’s housing market
  • 20. Part 03 The Mystery of Vacancy Rates
  • 21. The mystery of the vacancy rate  Most developers/government officials/researchers may disagree:  Between 2000 and 2010, about 70 million additional families in the city.  From 2000 to 2013: net increase 70 million units of housing  The aggregate housing demand/supply in urban China are roughly balanced.  Where to find 50 million vacant units? Completed new construction 10.4 billion sq meters Demolition and reallocation 3 billion sq meters Net increase 7.04 billion square meters
  • 22. 33.35% 36.22% 49.68% 56.10% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% Urbanization rates in China About 1.3% or about 16 million people year become urban residents.
  • 23. 23 Urbanization in general  Many researchers would equalize urbanization as migrants who leave their rural homes to go to urban areas to work and to live.  In fact, urbanization in China is quite complicated.  Some changed their Hukou from rural to non-rural.  Some relocated to urban areas.  Some never moved but their areas are turned into urban areas.
  • 24. Urban residents Rural residents Non rural Hukou Rural Hukou Rural to Urban Original Nonrural Hukou Land acquisition, house demolition Education, Employment buy houses Rural Hukou Nonrural Hukou 0.9% 10 mil 8.0% 110 mil Redefined Migrants Relocating Migrants 11.1% 150 mil 9.1% 125 mil 40.2% 560 mil 2.4% 30 mil 28.4% 390 mil Data Source: CHFS
  • 25. 25 Variables Overall demand Rigid demand Upgrading demand Redefined migrants (in percentage points) -10.7 -8.1 No difference Relocating migrants (in percentage points) -7.6 No difference -4.7 Redefined migrants have less housing demand Rigid demand: those who don’t have an apartment in the city of their living and grown- ups who live with their parents. Upgrading demand: 20-year old apartments
  • 26.  There are more Redefined Migrants than Relocating Migrants.  Treating these two types of migrants the same lead to a substantial overestimate of housing demand.  Misunderstanding urbanization is likely a cause of 38 million overbuilt units of commercial housing in China. 26 Summary
  • 27. 27 Restimating urbanization rates in China  How an area is reclassified to urban: connectivity  An administrative village is often consisted of 8 natural villages.  If the village center is connected to a town center:  A connecting road is built  Along the connecting road, most are non-farm land or buildings.  The whole administrative village is reclassified as an urban area.
  • 28. CHFS’ corrections on urbanization rates Data sources:CHFS, NBS and local statistical bulletins 56.1 68.7 51.2 66.5 57 47.7 65.8 60.9 5.8 11.1 10.7 8.9 8.6 8.2 5.7 4.2 0 10 20 30 40 50 60 70 80 National Guangdong Hebei Jiangsu Sandong Sichuan Zhejiang Chongqing Urbanization rates and CHFS correction NBS Urbanization Rate Correction
  • 29. Thank You! Contact us: pr@chfs.cn Let China understand herself, Let the world know China.