[Trapped Chinese Economy]⑤ Ghost Apartments Nationwide... Left Abandoned Without Demolition

"I don't even remember how long it's been since the construction stopped. It's dangerous, so please leave quickly."

Shijiazhuang, the capital of Hebei Province in China, with a population of 11 million. This place, which has good accessibility as it borders Beijing, has seen apartments left unfinished for several years. The rebar remains exposed and has turned red, and abandoned materials lie scattered on one side without being organized. As I wandered near the loosely erected fence, a nearby resident urged me to leave, saying it was dangerous.

Dalian in Liaoning Province, the gateway port of the Northeast Three Provinces. Jinzhou and Wafangdian along the coast resemble ghost towns in many places. When driving along the roads by taxi, it is hard to find buildings with lights on. Once thriving with tourism targeting Koreans and Japanese, the entire city's vitality quickly declined as borders closed due to COVID-19. Construction of hotels and resorts near the coast was also halted midway, creating a grim atmosphere in the area.

Vacant Houses Become Eyesores... Unsold Housing Soars 18%,
Failing to Drive China's Economy, Becoming Its Biggest Risk

The capital of Hebei Province, Shijiazhuang, China, with a population of 11 million. Located adjacent to Beijing with excellent accessibility, unfinished apartment buildings that have been left abandoned for several years remain as eyesores. (Photo by Kim Hyunjung)

Across China, unfinished apartments, buildings, hotels, and bridges have become urban headaches. The real estate market slump, triggered by tightened government regulations and the spread of COVID-19, has lasted over three years, leaving behind these eyesores. Local governments, strapped for funds, neither demolish nor repair or complete these buildings, leaving them unattended.

According to the National Bureau of Statistics of China, as of the end of June this year, the area of unsold commercial real estate reached 641.59 million square meters, a 17% increase from the previous year. Among these, the area of unsold new housing increased by 18%. Based on the first half of the year, the total area of newly started real estate projects was 498.8 million square meters, down 24.3% compared to the same period last year. This means that a quarter of the scale of new real estate construction, which could have quickly driven China's economy entering a downturn, has disappeared. During the same period, new housing sales were 600 million square meters, down 5.3% year-on-year, and investment was 5.9 trillion yuan (approximately 105.22 trillion KRW), down 8%.

Wang Lin, a taxi driver and resident of Shijiazhuang, explained, "Some buildings were left unfinished, and some stopped after painting was done following completion. I waited because they said the tallest high-rise apartment would be built nearby, but now the construction is halted and it looks ugly." Wang added, "It would be better if they just demolished it; that would be more comforting."

Liu Xuecheng, a licensed real estate agent in Beijing, said, "The further you go into the provinces, the more unsold properties accumulate and transactions stop. Local governments with poor financial conditions leave unfinished hotels or apartments unattended." Liu continued, "In the past, around this time, we were busy training university graduates, but recently, many young employees who worked with me have quit because their income is no longer the same."

Dalian, Liaoning Province, a gateway port city in the Northeast Three Provinces. In Wafangdian, located along the coast, unfinished apartments are abandoned in many places, giving off the feeling of a ghost town. (Photo by Kim Hyunjung)

A resort under construction that was built in anticipation of coastal tourism demand but has been halted. Such sites are abandoned throughout Dalian. (Photo by Kim Hyunjung)

"Chinese People No Longer Want to Invest in Real Estate" - First Decline in Personal Mortgage Balances Since 2004

The sluggishness of China's real estate market is due to decreased investment appeal and oversupply, deepened by COVID-19. Zhu Baoliang, chief economist at SIC, explained, "China's real estate supply and demand are balanced. Urban residents already own 1.1 homes per person, and they have no intention of additional real estate investment or speculation."

According to the quarterly loan report recently released by the People's Bank of China, the balance of personal mortgage loans in the second quarter was 38.6 trillion yuan, a 0.7% decrease compared to the same period last year. This is the first time personal housing loans have decreased since the People's Bank began publishing statistics in 2004.

Of course, demand remains strong in first-tier cities such as Shanghai, Beijing, and Shenzhen, as well as second-tier cities like Hangzhou and Nanjing. The chief economist said, "In these areas, there is still so much waiting demand that housing must be purchased by lottery, and housing prices have not fallen." He added, "The government's announced regulatory easing is likely to be implemented only in localized areas within Beijing, considering these factors."

Meanwhile, a Chinese government official recently held a roundtable with representatives from state-owned and private real estate companies, reiterating policies to stimulate the real estate market. Ni Hong, Minister of Housing and Urban-Rural Development, announced plans to relax criteria for the homeless, offering preferential mortgage rates and lower down payment ratios. Earlier, the government ordered relevant authorities to partially ease loan regulations for real estate developers and announced support for interior construction projects that could immediately boost consumption.