The Story of China's Ghost Cities and Its 65 Million Empty Homes

There is a ghostly London, Manhattan, and Paris lying within China.
Rupendra Brahambhatt

There are about 687 cities in China, and the real-estate sector accounts for a whopping 29% of the country’s total GDP. However, the Chinese real estate market has also been grabbing a lot of media attention lately, due to the $300 billion Evergrande debt crisis, but this is not the only big problem the housing market in China is facing.  

A recent report reveals that about 20% of the total urban housing properties in China — around 65 million properties — are vacant. This 20% includes large sections of cities like Tianducheng, Thames Town, Binhai, and many others which span across hundreds of square kilometers but have far more empty buildings than occupied ones. Such "ghost cities" in China have well-connected roads, infrastructure, skyscrapers, and a variety of public spaces, but are vastly underpopulated and have vast areas that are completely without residents

How did China become a land of ghost cities?

The Story of China's Ghost Cities and Its 65 Million Empty Homes
Source: Andrea Piacquadio/pexels

Real estate was once a sector where investment was considered safe and profitable in China. Even the Chinese government encouraged investment in property because, for decades, the real estate market, and its more or less continuously rising prices, has been a key driver in increasing the country’s wealth, as well as household income.

The communist government accumulates sales revenues worth billions of dollars from land sales and the earnings of the property market, and the reason behind this real estate-driven economy lies in the country’s constitution. According to the Chinese constitution, all the land in China is owned by the state, so when developers want to build on a piece of land, they have to lease it from the government, often by participating in local land auctions. 

Another reason for the previous uncontrolled growth of the real estate market in China is that, compared to the people living in the U.S. and Europe, far fewer Chinese citizens invest in the stock market. In the U.S., around 52% of the U.S. population own stocks, and around 65% own property. While in China, only around 7% of the population own stocks, but around 90% are homeowners. This includes 70% of millennials, with many planning on buying additional investment properties. This speculation in investment property is also why real-estate holdings in China account for a big share of total household wealth. Around 70% of household assets are held in real estate.

The extent of real estate development that occurred in the country can be visualized from the fact that the amount of concrete used by the US in the entire 20th century is less than what China exhausted only in the three years between 2010-2013.

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For many years, the bubble in the Chinese housing market led to rising property prices and developers scrambled to build ever-more units. But demand for units has now shrunk, due to a number of factors, including increasing unaffordability of homes, an aging population, and slowing population growth. 

The incredible amount of public interest in real estate generated a steady stream of wealth for the government and significantly contributed to the rising number of homeowners in China. However, this also led to the existence of several ghost cities and towns that emerged as a result of uncontrolled urbanization and construction activities in the country. 

Each year, a total of around 3 million homes are built in Europe and the US, but China has been constructing more than 10 million residential units annually. Most of the people in China already own property, so they don’t need a new place to live, but many of them continue to buy the newly developed real estate as investments. 

According to experts, sometimes these sold-out houses, buildings, neighborhoods, and even entire cities remain vacant for years, due to a supply-demand imbalance (also believed to be one of the reasons for the Evergrande crisis) caused by excessive urbanization in China. A report reveals that there could be as many as 50 ghost cities in China at present.

Unlike parts of the US and Japan, where unoccupied homes in various states of abandonment and decay have earned cities and regions the titles of "ghost towns," China's are different. They're not abandoned, but rather unoccupied.

Some of the famous ghost cities of China 

The Story of China's Ghost Cities and Its 65 Million Empty Homes
Source: Roman Ska/pexels

The real estate culture in China not only escalated infrastructure development but also brought drastic changes in population distribution. According to a report from the World Bank, more than 60% of China’s current 1.4 billion citizens, now reside in cities. However, there are many cities in China that still await people:  

  • Tianducheng - the Paris of China

Popular among couples for wedding shoots, the city of Tianducheng, located about two hours west of Shanghai, was constructed to resemble a miniature Paris. Built to support a population of 10,000, the town includes a 300-foot (91 m) tall Eiffel tower, grey Parisian facades, cobblestoned streets, and Renaissance fountains.

The Story of China's Ghost Cities and Its 65 Million Empty Homes
The Eiffel Tower replica in Tianducheng. Source: MNXANL/Wikimedia Commons

Built in 2007, by 2013, the city had only 2000 residents and at that time, it was being referred to as a ghost town. However, recent reports reveal that at present, there are more than 30,000 people living in Tianducheng, and the city population is witnessing an upward trend.

  • Ordos - a doomed metropolis?

Located in the Inner Mongolian region, Kangbashi district of the prefecture-level city of Ordos was built to house 300,000 residents. But for many years, only around 2,000 people lived here and much of the area gave off the vibes of a large and vacant post-apocalyptic world. This ghost city has also been featured in the famous photo series "Ordos - A Failed Utopia" and "Unborn Cities".

According to a report, in the past few years, the Chinese government has moved some of the country’s top education institutes (including both schools and universities) to Kangbashi. Because regulations require parents who want to send children to particular schools to own a home within the district, the area has since been flooded with new residents, as many students and their families are now moving to Ordos for quality education.

  • Tonghui Town - the abandoned Switzerland of China

Built to attract tourists, the architectural design of Tonghui Town seems to be taken from the streets and houses in Switzerland and Italy. The town is not a "town" but a European-style bar street located in the Chaoyang district of Beijing. It incorporates various European-style restaurants, watchtowers, bars, and other structures.

Unfortunately, due to poor public reception, the "town" never took off — joining an estimated 1,600 other unprofitable theme parks in China. Most of the buildings were subsequently abandoned.

  • Thames Town - Shanghai’s London

One of the few places in Asia where you can find London’s signature red telephone booths, English-style buildings, and statues of Harry Potter and James Bond, is Thames Town. Built in the Songjiang District of China in 2006, just 24.8 miles (40 km) from Shanghai, this London-look alike locality has cobblestoned streets, a village green, Edwardian town homes surrounded by neat privet hedges, and white stucco Victorian terraces. There's also a mock-Tudor pub, and a fish-and-chip shop, along with numerous other commercial and residential properties, most of them now vacant.

Two billion yuan (about $330 million) was spent over three years to create this piece of Merrie Olde England in China.

The Story of China's Ghost Cities and Its 65 Million Empty Homes
Thames Town. Source: Huai-Chun Hsu/Wikimedia Commons

In the beginning, properties in Thames town were selling fast, but most are purchased as investment properties and were never occupied. Soon, restaurants were closed and the whole place became a vacant property investment hub. 

  • Yujiapu -  an empty Manhattan in Binhai

Financial districts like Yujiapu and Xiangluowan were built in Binhai to serve as new economic hubs in the North China region. Both regions have large and fully developed government headquarters, shopping malls, high-rise skyscrapers, and every other kind of infrastructure that is required to support a fast-paced economy. 

Unfortunately, despite this much development, more than 10 years have passed since the construction was completed, but the occupancy rates in Yujiapu and Xiangluowan are still low enough to label them as ghost towns.

The Evergrande crisis and future of real-estate in China

The Story of China's Ghost Cities and Its 65 Million Empty Homes
Source: JOHN TOWNER/unsplash

Evergrande is one of the top two real estate companies in China, and it recently ranked at 122nd position among the world’s top Fortune 500 companies. As of December 2020, the Evergrande Group had 123,276 employees and also owned 139,614 acres (565 million square meters) of land in China. However, the company is currently facing a cash crunch, which is believed to have resulted from its risky business model, which relied on short term debt, and the decline in real estate sales during the lockdown. 

Evergrande’s model worked as long as it could keep building and selling at an inexorable rate. The company would borrow to buy land, get homeowners to buy off the plans, and then borrow again to start another project. Behind the rapid growth, a big interest bill was mounting. By July 2020, the company's liabilities had reached 86 percent of all of its assets and the group turned increasingly to short-term lending with high interest rates. 

In September 2021, the company missed an $83.5 million bond payment, and since then speculations are going on that due to its thumping $300 billion debt, Evergrande may fall soon, an event some economists worry could lead to a severe economic downturn in China. 

While the Chinese government has already ordered local authorities to stay prepared for the situation that could arise after Evergrande’s collapse, real estate sales in China have already slowed down. 

The Evergrande liquidity problem has revealed the big supply-demand gap in China’s housing market. Many experts believe that if Evergrande falls, it may not bring a global economic crisis (like the one that followed after the collapse of Lehman Brothers in 2008), but it could give a severe blow to other property companies in China and affect the country's thriving real estate culture.

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