A real-estate showroom in China.
A former China statistics official said the country’s property developers need to “transform” their businesses.
That’s because there’s an oversupply of homes for China’s 1.4 billion population.
He suggested the Chinese government and companies can buy up empty homes and rent them out.
A former Chinese government official has told the country’s beleaguered real-estate developers to change up their business strategies because there are just way too many empty homes.
“How many vacant homes are there now? Each expert gives a very different number, with the most extreme believing the current number of vacant homes are enough for 3 billion people,” said He Keng, a former deputy head of China’s statistics bureau, according to a Reuters translation of a video from state-owned China News Service.
“That estimate might be a bit much, but 1.4 billion people probably can’t fill them,” He said, referring to China’s population.
He, who was speaking at a conference over the weekend, said it’s unwise for real-estate companies to continue their “rapid developments” under current circumstances, according to Insider’s translation of the widely reported comments he made at a conference over the weekend.
Real-estate companies must thus take the initiative to “transform” their businesses, he added.
The former official did not appear to prescribe specific solutions for the real-estate developers but suggested that the many empty houses in China can be purchased by the authorities or companies as rental units for those who cannot afford to buy their own homes.
The former official’s comments came amid troubles in China’s property sector that has been brewing since 2021 when property giant Evergrande — then the world’s most indebted company — ran into a liquidity crisis. It had about $340 billion in liabilities as of end-2022 and filed for US Chapter 15 bankruptcy protection in August.
The crisis came to a boiling point this summer when other Chinese real-estate developers ran into similar issues, and the sector started to default on its bond payments. The cash crunch also slowed down home construction, prompting some buyers who pre-paid for apartments to refuse to repay their mortgages.
China saw a decades-long boom in its real-estate sector before the current crisis hit. The market was so hot that Chinese developers were taking on massive borrowings to build apartments ahead of demand.
In fact, property developers built so many apartments that one-fifth of the homes in China were empty, Insider’s Lina Batarags reported in October 2021.
The situation doesn’t seem to have improved. There were 3.5 billion square feet of completed but unsold apartments in February. That number seems to have ballooned to about 7 billion square feet in August per Reuters — which translates to around 7.2 million homes, based on an average home size of around 90 square feet.
There are now fears China’s property troubles could spill into the broader domestic economy and the international markets.
Investment in property in China fell about 19% in August from a year ago — marking its 18th straight month of decline, according to Reuters calculations based on official data released on September 15.
China’s embassy in Washington DC and the country’s statistics bureau did not immediately respond to Insider’s request for comment.