The crisis in China's property sector is going from bad to worse. As per reports, in the country, a demolition campaign is gaining speed.
As the world's second-largest economy struggles under the weight of a faltering real estate market, indebted Chinese developers have been forced into a crisis. After massive quantities of debt-fueled construction, China now has enormous, uninhabited "ghost cities," and when builders run out of money, demolitions happen.
Analysts have warned Beijing has adopted a "build, pause, demolish, repeat" policy as Chinese officials try to limit supply to prevent a drop in property prices and increase economic activity through additional construction.
In an effort to revive the slumping real estate market, the Chinese government is reportedly demolishing tower blocks and halting work on structures that could accommodate 75 mn people or more than the entire UK population.
Citing figures by researchers in recent years around 3 bn sq mt of housing in China has been paused or demolished. In mainland China millions of apartments remain unoccupied. Due to the oversupply of vacant properties, the already unstable housing market in China may experience challenges with prices dropping even more.
The Chinese property research institute Bic Research Institute (BRI) has issued a warning in its most recent study, noting that China has no scarcity of homes, sitting unoccupied, and that "such high vacancy is risky."
“A large potential supply is represented by vacant homes. When predictions for the housing market turn negative, a significant number of vacant homes will be put on the market, which could add to downward pressure on home prices," it added.
The average vacancy rate on the Chinese mainland is 12.1 per cent, according to the BRI report. This is much higher than in the UK, where only 0.9 per cent of homes are vacant, in Australia, the proportion is 11.1 per cent, and in the United States, it is 9.8 per cent. That figure amounts to nearly 50 million vacant. As per government statistics, there are roughly 400 million homes in mainland China.
