UPDATED: Housing vacancy rate in major Chinese cities at 12%, analysts warn of oversupply risk in housing market
UPDATED: Housing vacancy rate in major Chinese cities at 12%, analysts warn of oversupply risk in housing market

UPDATED: Housing vacancy rate in major Chinese cities at 12%, analysts warn of oversupply risk in housing market

 

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The average housing vacancy rate in China’s 28 major cities is currently at 28%, a relatively high level, according to a report released by the Beike Research Institute on Friday, based on a survey conducted in 30,000 residential communities in the 28 cities.

The analysts at Beike expect the vacancy rate to climb further and the housing market may face oversupply risks.

Generally speaking, a vacancy rate of 5% – 10% is considered reasonable, while a ratio above 10% is see as too high, indicating an oversupply in the housing market and risks in high housing inventories, said the report.

In breakdown, the average housing vacancy rate in China’s four tier-one cities is currently at 7% , tier-two cities 12% and tier-three cities 16%, according to the report. Average housing vacancy rate in only nine of the 28 cities is within a reasonable range, the rate in six cities is higher than 15% and the rate in most cities is between 10% – 15%, said the report.

The vacancy rate in cities of Nanchang in central China’s Jiangxi province, Langfang in north China’s Hebei province and Foshan in south China’s Guangdong province, ranked the highest, all above 15%, while three top-tier cities including Shenzhen, Beijing and Shanghai have the lowest vacancy rate, below 7%, according to the report.

The average 12% housing vacancy rate in the 28 cities is higher than the UK (0.9%), France (7.8%), Canada (8.7%), Australia (9.8%), the US (11.1%), Brazil (11.1%), and only below Japan (13.6%), according to the report, citing data from the Organisation for Economic Cooperation and Development (OECD).

Notably, the survey only included existing housing that were vacant for more than three months, and unfinished houses and unsold finished houses were excluded from the survey. If including unfinished houses and unsold finished houses, the vacancy rate will likely be even higher.

According to a survey conducted by the Southwestern University of Finance and Economics in 2017, which included existing vacant homes, unfinished housing, unsold finished homes and sold but unfurnished homes, the average housing vacancy ate in China’s tier-one cities stood at 16.8%, tier-two cities 22.2% and tier-three cities 21.8.

“Overall speaking, there is no lack of housing in China, but there is an imbalance in the structure of the housing market,” Beike Research said in the note. The imbalance refers to the divergence between vacancy rate in cities of different tiers, and also refers to the divergence between the vacancy rate in different locations with cities, it said.

“A certain degree of vacancy rate is reasonable and necessary, but excessively high vacancy rate is alarming,” it said.

When there is a strong expectation for price drops in the housing market, a large number of vacant homes entering the market could sharply increase home supply and intensify the supply-demand imbalance and increase the risks for price drops, it said.

Since the second quarter of the year, some cities have relaxed home resales, leading to sharp increases in new listings of second-hand homes, reflecting that the amount of vacant homes is to high, said Beike.