If I was a property investor in China I would be a bit nervous about the news that the results of research is about to be released into the housing market in the Middle Kingdom. This research into the Chinese urban housing stock by a team at Chengdu’s Southwestern University of Finance and Economics will show that vacant properties make up roughly 22 per cent of the entire housing stock. This is about 50 million empty homes (excluding ones that have yet to be sold by developers).

By way of contrast, Hong Kong has a home vacancy rate of less than five per cent, the same rate in the US is about 11 per cent and Japan and Taiwan both have vacancy rates of less than 15 per cent. According to Professor Gan Li, who is running the main nationwide study:

“There’s no other single country with such a vacancy rate…should any crack emerge in the property market, the homes to be offloaded will hit China like a flood.”

The concern is that owners of unoccupied dwellings will rush to sell if the market starts to tank, further reinforcing the downward trend and potentially creating a crash. Interestingly enough however, the vacancy rate in China has not changed since the last study in 2013. Back then it also stood at 22.4 per cent. So obviously the country can absorb a large percentage of its housing stock lying empty for a number of years. The question will be how long that can continue.

Rising house prices and property speculation have locked millions of people out of the housing market, especially younger buyers and have exacerbated inequality. In October last year, President Xi said that “houses are built to be inhabited, not for speculation”. One option is to use property or vacancy taxes to try and discourage home hoarding, but neither appear imminent. Also there may be an issue trying to determine what counts as vacant. Some properties are holiday homes and the empty dwellings of economic migrants seeking work elsewhere in the country.

As the Chinese population declines in the years to come, the number of empty homes may start to rise further. In Japan, empty homes are nearly being given away by local governments (all you need to do is pay the back taxes on them and make them liveable!) Perhaps this will be an option to help home ownership rates in China in the years ahead.

Marcus Roberts is a Senior Researcher at the Maxim Institute in Auckland, New Zealand, and was co-editor of the former MercatorNet blog, Demography is Destiny. Marcus has a background in the law, both...