The Housing Problem: China's Ghost Cities

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By Rob Gelb

Imagine cities like New York City completely deserted, where the homes of millions of people are either uninhabited or abandoned. A ghost town, if you will. China faces such realities in their country, as demand continues to suffer in the housing market and prices keep falling. Based on data from China's National Bureau of Statistics (NBS), new home prices fell by 5.1% on average from the year-ago period for a majority of cities. The housing sector is significant in China, too, contributing to around 15% of its economy. Furthermore, housing is so abundant that there are not enough people to live in these properties. That is where “ghost cities” start springing up throughout the country. As business executive Michael Garrity notes, “The problem China has now is large developer inventories. Chinese developers have two to five years of inventory still to sell off.” One of the main responses by the Chinese government has been more stimulus, particularly in the housing sector. While this initiative has been swift--there was a $328 billion surge in new credit two months ago--pumping in so much money to prevent housing prices from falling will not work overnight. Even if China can handle this spending now, who is to say that their money is going where it needs to in the long run?

Sources

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