Caixin
Aug 06, 2022 04:26 AM
ECONOMY

Vacancy Rates in Chinese Cities Signal Risk of Oversupply

What’s new: A real estate market research institute warned of oversupply in China’s housing market as vacancy rates climbed in major Chinese cities.

The average housing vacancy rate in China’s 28 major cities reached 12%, higher than the average rate in the U.S., Canada, France, Australia and Britain, according to a report issued Friday by Beike Research Institute, the research arm of KE Holdings.

The vacancy rate in Chinese cities is likely to rise further, indicating risks of excessive housing supply, Beike said.

The research covered 30,000 residential complexes in 28 of China’s largest cities, tallying housing units that remained vacant for more than three months. Unfinished and unsold properties were not included, according to Beike.

Why it matters: A low housing vacancy rate is usually an indicator of greater room for property market growth. A reasonable rate should lie between 5% and 10%, Beike said. Below that range, there is strong demand for housing and high potential demand. Higher vacancy rates signal excess housing supply, it said.

Beike’s survey found big differences in vacancy rates between large and small cities, indicating a structural imbalance, it said.

When the expectation of a decline in housing prices is strong, a large number of vacant houses may enter the market and lead to a surge in supply in the short term, aggravating the imbalance between supply and demand and further pushing down prices, according to the report.

Quick Takes are condensed versions of China-related stories for fast news you can use.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bob.simison@caixin.com)

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