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Housing Market and Urbanization
Southwestern University of Finance and EconomicsTexas A&M University
Li Gan
An Introduction of CHFS1
Vacancy rates in Urban China2
The mystery of the vacancy rate3
Contents
目录
Part 01An Introduction of China Household Finance Survey (CHFS)
Coverage
2011
40000 households
29 provinces 363
cities/districts/counties 1439 communities
8438 households
25 provinces 80 cities/districts/counties 160 communities
2015
2013
28141 households
29 provinces 262
cities/districts/counties 1048 communities
Jiangxi
Anhui
Heilongjiang
Guangxi
Chongqing
Jining
Yunnan
HunanHe
beiHe
bei
Fujian
Sichuan
Inner Mongolia
Henan
Guizh
ou
Ningxia
Zhejiang
Shandong
Liaoning
Gansu
Guangdong
Tianjing
Jiangshu
Shannxi
Shanxi
Shanghai
Beijin
g
Natio
nwide
12.6% 13.9%
15.4%19.1%
35.1%
16.4%
15.2% 19.2%
8.5%
25.3% 30.7%17.0%
Population shares of Housing Provident Fund
Official CHFS
Part 02The vacancy rate in Urban China
2011 2013 2015
89.7% 90.8% 92.7%
14.2% 16.7% 19.2%
Nationwide
Ownership rateMulti-house ownership rate
2011 2013 2015
84.7% 87.0% 90.3%
15.9% 17.9% 21.2%
Urban
Ownership rateMulti-house ownership rate
2011 2013 2015
95.9% 96.4% 96.6%
12.0% 14.8% 16.0%
Rural
Ownership rateMulti-house ownership rate
Rising Home Ownership Rates
2011 2013 20150.0%
5.0%
10.0%
15.0%
20.0%
25.0%
4.4% 4.0% 4.1%
16.0% 17.6% 18.7%
From one-house familiesFrom Multiple-house families
22.8%21.6%20.4%
Vacant houses(mil unit)
Vacant area(bil sq m)
2011 41,140 4.43
2013 47,270 5.09
2015 54,380 6.09
Vacancy rates in urban China
2011 2013 20150.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
17.3%19.8% 19.8%
16.3%
21.4% 21.6%25.0%
22.2%25.2%
Vacancy rates by city-tiers
First tier cities Second tier citiesThird or lower tier cities
United Nations
Seasonal vacancy
VacationSeasonal
Others
Non Seasonal vacancy
The second houseFor rentFor sale
For demolitionothers
For Rent and For sale Yes for all countries
Vacation/seasonal All countries except Germany and Spain
The second house All countries except Germany and Spain
For demolition/ remodeling
All countries (including Japan)
except USNot for living
purposes (offices, warehouses etc)
US: no
Under construction Japan: yesUS: No
How to define a vacant house?
Shares Contributions Units (10k)Vacation or seasonal 2.70% 0.63% 149Long term vacant 29.00% 6.61% 1576Occasional use 10.40% 2.38% 567Weekend use 2.10% 0.48% 114Work or schooling 7.00% 1.59% 378Second houses by owner 11.70% 2.67% 637 Temporarily used by a family member 12.10% 2.75% 657 sum 17.1% 4078
Long-term used by another family member 2.90% 0.66% 158Used by friends and relatives 6.40% 1.46% 348Not ready for living 15.70% 3.58% 853 Not yet remodeled or in remodeling 11.80% 2.69% 641 Under construction 3.70% 0.85% 203 To be demolished 0.20% 0.04% 9
Vacancy rates in urban China
Vacancy ratesNumber of vacant
units(in millions)
Current 22.8% 54.4
Japan comparable 20.7% 49.3
Most EU country comparable
20.0% 47.3
US comparable 17.7% 38.8
Different calculation of vacancy rates
US 2015
Japa
n 2013
UK 2015
Taipei
2014
Singa
pore
2013
Hong K
ong 2
013
Urban
Chin
a 201
50.0%5.0%
10.0%15.0%20.0%25.0%
12.9% 13.1%
2.7%7.6% 6.2% 4.1%
22.8%
International comparison
Commer
cial H
ousin
g
Social
welf
are h
ousin
g
From
hou
sing r
eform
Collec
tive f
unded
Self-
built
Demoli
tion re
place
ments
Other
s
22.6%
31.9%
13.3%9.4%
18.9%14.3%
32.5%
24.7% 22.6% 13.0%
10.9% 12.7%16.8% 18.2%
25.2%
20.1%14.3%
12.3% 15.9%19.4% 20.5%
Vacancy rates from different sources
2011 2013 2015
2011 2013 2015
Commercial Housing 47.6% 50.4% 59.2%
Social welfare housing 3.5% 4.0% 3.0%
From housing reform 7.4% 8.2% 8.2%
Collective funded 2.6% 2.8% 2.5%
Self-built 24.4% 17.3% 13.2%
Demolition replacements 4.0% 8.3% 6.7%
Others 10.4% 9.1% 7.2%
Contributions to the vacancies
60% of vacant houses are commercial housing
Vacancy rates in 2015
From non-residents
From residents
Vacancy rates in 2013
Beijing 23.5% 3.9% 19.6% 19.5%
Shanghai 20.3% 0.8% 19.5% 18.5%
Tianjin 24.0% 1.1% 23.0% 22.5%
Wuhan 24.7% 2.0% 22.7% 23.5%
Chengdu 27.3% 1.5% 25.8% 24.7%
Congqing 24.4% 2.8% 19.0% 25.6%
Vacancy rates from new purchases are rising
≤2 years 3-5 years 6-10 years 11-15 years 16-20 years ≥ 21 years0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
33.6%
23.2%
12.6% 10.4% 12.5%16.7%
57.2%
28.1%
16.3%13.1% 12.9% 13.6%
2013 2015
Factors related to vacant housing Marginal effect
If income doubled + 0.6 percentage points
Head one more year of education + 0.6 percentage pointsWith unmarried young men + 2.2 percentage pointsOwn businesses + 11.2 percentage pointsHigh risk-taking altitude + 5.3 percentage points
House price rental ratio doubles + 6.1 percentage points
First house yields a double return + 0.2 percentage pointsUrbanization rate increases by 10 percentage points - 2.6 percentage points
Why households own vacant units
19
Current Housing prices fall by 5%
Housing prices fall by 10%
Housing prices fall by 20%
Housing prices fall by 30%
Housing prices fall by 40%
Housing prices fall by 50%
4.0%6.6% 7.6%
10.4%14.2%
18.8%
24.2%
5.4%
17.1%20.2%
28.0%
36.3%
42.3%
49.1%
Non-vacant Housing Vacant housing
19
A stress test reveals a substantial risk for China’s housing market
Part 03The Mystery of Vacancy Rates
The mystery of the vacancy rate
Most developers/government officials/researchers may disagree: Between 2000 and 2010, about 70 million additional families in
the city. From 2000 to 2013: net increase 70 million units of housing The aggregate housing demand/supply in urban China are
roughly balanced.
Where to find 50 million vacant units?
Completed new construction
10.4 billion sq meters
Demolition and reallocation 3 billion sq metersNet increase 7.04 billion square
meters
1998
1999
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
33.35%36.22%
49.68%56.10%
Urbanization rates in China
About 1.3% or about 16 million people year become urban residents.
23
Urbanization in general
Many researchers would equalize urbanization as migrants who leave their rural homes to go to urban areas to work and to live.
In fact, urbanization in China is quite complicated.
Some changed their Hukou from rural to non-rural.
Some relocated to urban areas.
Some never moved but their areas are turned into urban areas.
Urban resident
s
Rural residents
Non rural Hukou
Rural Hukou
Rural to Urban
Original Nonrural Hukou Land
acquisition, house demolition
Education, Employmen
tbuy houses
Rural Hukou
Nonrural Hukou
0.9%10 mil
8.0%110 mil
Redefined
MigrantsRelocatin
g Migrants
11.1%150 mil
9.1%125 mil
40.2%560 mil
2.4%30 mil
28.4%390 mil
Data Source: CHFS
25
Variables Overall demand
Rigid demand
Upgrading demand
Redefined migrants (in percentage points) -10.7 -8.1 No
difference
Relocating migrants (in percentage points) -7.6 No
difference -4.7
Redefined migrants have less housing demand
Rigid demand: those who don’t have an apartment in the city of their living and grown-ups who live with their parents.Upgrading demand: 20-year old apartments
There are more Redefined Migrants than Relocating Migrants.
Treating these two types of migrants the same lead to a substantial overestimate of housing demand.
Misunderstanding urbanization is likely a cause of 38 million overbuilt units of commercial housing in China.
26
Summary
27
Restimating urbanization rates in China
How an area is reclassified to urban: connectivity
An administrative village is often consisted of 8 natural villages.
If the village center is connected to a town center:
A connecting road is built
Along the connecting road, most are non-farm land or buildings.
The whole administrative village is reclassified as an urban area.
CHFS’ corrections on urbanization rates
Data sources: CHFS, NBS and local statistical bulletins
National Guangdong Hebei Jiangsu Sandong Sichuan Zhejiang Chongqing0
10
20
30
40
50
60
70
80
56.1
68.7
51.2
66.557
47.7
65.860.9
5.811.1 10.7 8.9 8.6 8.2 5.7 4.2
Urbanization rates and CHFS correction
NBS Urbanization Rate Correction