64.5 Million Empty Flats In China?

   Andy Xie writing in China International Business dropped a potential bombshell: up to 64.5 million flats in China reported zero energy consumption over a six month period, meaning that no one is living in them.  Xie estimates the value of real estate held for speculative purposes is around 15% of China's GDP. Furthermore, if we assume only half of the 64.5 million flats are being held by speculators, that would represent 20% of all urban housing in China. If this is not proof of a housing bubble in China I don't know what is. Here are a few excerpts from the article:
Recent media reports citing information from China's electricity authority claimed that 64.5 million urban electricity meters registered zero electricity consumption over the past six months, equating to enough empty flats to house 200 million people. The electricity authority has since denied the figure. Whether or not this sensational number is credible, obtaining a reliable figure should be a priority. Otherwise, national policies may be made in the dark.

China is experiencing a property price bubble. What distinguishes China's property bubble from others is its unprecedented quantity dimension. China does not have any constraints limiting supply. The stock of empty flats measures the size of the quantity bubble. Taiwan experienced a price-cum-quantity bubble in the late 1980s. At that time the market quantified the number of empty flats by obtaining data from the electricity supplier on flats without usage of electricity. The stock of empty flats measured this way was about 15% of total households. Some analysts are trying the same tactic to quantify the volume of empty flats in the Chinese mainland however the complexity of the mainland's housing conditions makes it difficult to use this methodology.
Urban housing stock is mostly split between older public housing units and private housing units that have sprung up in the past ten years. The latter comprises about sixty million units. About twenty million are under development by property developers. The local government-owned land banks may account for another 20 to 30 million. A large number of public housing units have been torn down for redevelopment. The stock before the latest big wave of redevelopment was probably above 10 billion square meters. The amount of demolished units can't be too large relative to the newly built housing stock. Otherwise, it wouldn't make business sense for local governments. The remaining stock is probably around 9 billion square meters. Even if China's empty urban flats are less than 64.5 million, it could be half as many as defined by international standards. That would still be equivalent to 20% of the urban households, higher than Taiwan's vacancy rate at its peak. Moreover, if the property tightening is loosened, the rate could rise above 30% of urban households.

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  1. some middle size cities were overbuilt with municipal bonds....

    1. The post above about china suggests that their not as glowing a oicture of economic health as it appears.