A recent report from the State Grid Corporation of China (SGCC), a power grid corporation owned by the State Council, says 65.4 million houses in 660 cities across China have had zero electricity consumption for six months in succession. These houses, assumed to be vacant, can hold an estimated 200 million residents.
Among the many newly constructed projects, the “Jingjin new district” is claimed to be Asia’s largest luxury villa compound, located in a suburb of Tianjin, a metropolis 93 miles away from Beijing. The district has been an empty town since its construction was completed six years ago.
The Economic News Daily quoted Xiao Yang, a driver in the sales office of the half-complete “Jingjin new district,” as saying that most owners have not moved in and the area becomes pitch-dark and frightening at night. The villa compound covers 25,000 mu (4,118 acres). It takes him 45 minutes to go around driving a battery truck along the main roads, Xiao says.
A Global Entrepreneur magazine reporter listed five real estate development projects in Tianjin with a total residential building construction area of 23.7 million square meters (255 million square feet). In contrast, the total house sales in Tianjin were 13.2 million square meters (140 million square feet) in 2009, a record high for the city.
China’s State Council has now approved a second phase of construction for the “Jingjin new district;” the projected area spans 258 square kilometers (100 square miles), an area five times larger than the completed phase of the project. According to the project plan, the second phase includes 8,000 additional villas, a five-star hotel, a large-scale business center, and “Asia’s largest hot spring resort.” It could support a resident population of half a million. The projected total cost is 12 billion yuan (US$1.8 billion).
Similar projects are in the planning phase and under construction. Tianjin city has plans for the expansion of 11 districts. The property developer has acquired most of the land. Without exception, they target the rich or the upper middle-class.
The Global Entrepreneur report concluded, from the use of water, electricity, and gas, that the vacant houses in major Chinese cities range from 20 to 40 percent. In the suburbs of the cities, the rates are higher.
Mao Yushi, a prominent Chinese economist, pointed out that property market bubble is caused by the vacant housing ratio, and not by the property cost. Even in tier-two or -three cities, if this speculative trade continues, there is bound to be a sharp increase in vacant houses and an eventual housing market bubble.