As reported in the Beijing Morning Post, offerings for vacant house management services began appearing this summer after a CCTV investigation showed that the vacant housing rates in Beijing and Tianjin have reached 40 percent, and that many of the unoccupied houses are new.
Then in September, the National Bureau of Statistics announced it would conduct surveys on the vacancy rates in different cities, and that Beijing had been selected as the first. The Bureau did not state a reason for the survey but some analysts and critics of the Chinese economy, after looking at the situation, see it as one where supply and demand are hopelessly unbalanced.
Vacant or Not?
A Mr. Wang posted an advertisement on qq.com which points out the three ways the survey will determine if a house is vacant: by entering the premises, by checking the utilities and by asking the developer. He said that his house sitters can be wherever they are needed for people looking to skirt the survey. Sitters can periodically enter the house and turn on the lights and water; as long as the meter readings increase, the inspectors will be satisfied. Wang also has sitters who will work with the developer and act as residents.
Wang began offering his service this past May, with rates that differ based on the age and style of the houses. He even gives discounts for good clients with multiple houses. He says that inquiries about his services increased after the survey was announced.
Statistics Unpublished
Hong Wei, a real estate critic who maintains a blog, points out that every city’s real estate management department has an office which should have detailed information about vacancy rates. But not a single city has published these statistics.
According to Global Entrepreneur Magazine, the vacancy rate is easy to estimate from utility usage. The fact that it is not must be revealing, because the figure would be a blow to the real estate market, the article speculates.
Hong Wei presents an incisive analysis: the fact that there is demand for a “vacant housing management service” at all indicates something is amiss: owners of legally purchased properties have the right to leave their houses empty, so demand for the service must be a reflection of abuse of power, probably by Party officials, he indicates.
He notes that many officials possess large numbers of properties, far beyond what can be accounted for by their officially reported income.
Hao Pengjun, the former director of a county level coal bureau in Shanxi Province, is held up as an example. He purchased 36 properties in Beijing, Hainan, and Linfen, and the money for that was not from his government income, Hong writes.
For Hong, house sitting services represent an attempt by entrepreneurs to capture the market of officials who want to avoid scrutiny of their real estate holdings and finances.
It Gets Bigger
Another explanation goes that vacant houses are a symptom of excess speculation, and could constitute 15 percent of China’s Gross Domestic Product. The possibility exists that the bubble may grow in the next two years as control mechanisms designed to rein in property values are loosened.
Economist Dr. Andy Xie has warned that inflated housing prices were the main worry in the past, but that this time the risk of too many houses is higher. He estimates the vacancy rate to be between 25 and 30 percent, twice as high as it should be.
Another observer, Frank Xie, wrote in a New Epoch Weekly article that while China’s property markets are completely unbalanced, the price of an unsellable multimillion dollar property does not decline. He has seen ordinary citizens diligently documenting the high vacancy rate by taking nocturnal pictures of the houses as well as attempts by real estate agents to install lighting which will illuminate empty houses during the evening.
“The ugly truth of how banks, state enterprises and interest groups collude with one another will finally be exposed to the public,” he writes. “A dozen out of approximately 100 state enterprises are real estate developers and almost all of the state enterprises own or control daughter companies that are in the real estate business. This may be the largest open robbery in human history.”
Frank Xie notes that in normal circumstances, when the supply exceeds demand, a market will cool down. In China, however, the regime insists on continuing construction, and even demolishes houses built only a few years ago to make room for new ones.
“In the frenzy, people see bureaucratic monopoly and how people make extravagant profits from building houses that no one buys or lives in. The property market is still prosperous even though it is in such bad shape,” Frank Xie writes. “It seems that the communist China… proves the saying ‘Those whom the gods wish to destroy, they first make mad.’”
