Are Sky Gardens the Answer to China’s Property Market Woes?

China's real estate market is experiencing a downturn, characterized by sluggish sales. To combat this, developers and regulators are focusing on innovative housing projects, especially the so-called "fourth generation" residences, which aim to increase demand through upgraded living standards.[para. 1][para. 2] These residences incorporate rooftop gardens and elevated green spaces, tapping into the desire for improved lifestyles, though their long-term impact remains uncertain due to unclear regulations.[para. 2]

The concept of fourth-generation residences, adapted from an Italian design that merges living spaces with nature, emphasizes aerial forest garden architecture, incorporating sky gardens and vertical greenery into high-rise living.[para. 5][para. 6] In China, these residences are classified into three categories: private aerial gardens, shared aerial gardens, and elevated parking areas. [para. 6] For example, Guangzhou's project offers substantial balconies and aerial gardens, which were historically linked to luxury homes, at no extra cost.[para. 7][para. 8]

More than 70 fourth-generation projects have been approved across Chinese cities, with Nanjing and Xi'an leading the approval numbers.[para. 9] While these residences have sparked debate among real estate professionals, with some advocating for their potential to revitalize the market, others warn of a "siphon effect" that may drain purchasing power unsustainably from the broader market. This concern is amplified by the fourth-generation homes’ marketing emphasis on features like sky gardens and high "usable area ratios," which exceed previously established norms for commercial housing.[para. 10][para. 11][para. 12]

The higher usable area ratios of these homes, in some cases surpassing 100%, are achieved by offering complimentary spaces in units, such as sizable balconies that technically remain non-convertible without approval.[para. 12][para. 13] However, developers have sometimes reduced public space allocations, causing post-sale inconvenience for residents and leading to recent crackdowns on exaggerated complimentary area offerings.[para. 15][para. 16]

China's housing market crisis has severely impacted land sale revenues, which halved from 8.71 trillion yuan in 2021 to 4.87 trillion yuan in 2024, affecting local government finances.[para. 18] To counter the downturn, local governments are offering favorable conditions. Policymakers have shifted focus from fulfilling basic living needs to upgrading and promoting quality housing, as evidenced by revised residence design and floor area ratio requirements.[para. 18][para. 21]

Despite their popularity, fourth-generation homes raise concerns of merely redirecting existing demand, potentially hindering overall market growth.[para. 26] While costly to build due to their enhanced design needs, fourth-generation residences still maintain competitiveness due to low land acquisition costs currently facing developers.[para. 27] As more of these homes enter the market, differentiation intensifies, but the "siphon effect" dividing consumers between traditional and fourth-generation homes may gradually ease.[para. 29]

However, local governments like those in Guangzhou have already begun implementing more stringent regulations to manage this real estate innovation. These include reducing allowable balcony sizes and discontinuing free sky gardens, in response to market imbalances created by the earlier expansionary phase.[para. 33][para. 36] Despite these regulatory shifts, the market remains caught between encouraging innovation and managing existing supply pressures, with some cities allowing adjustments for plans crafted under previous guidelines.[para. 37][para. 39]