Where is China's next wave of empty 'new towns'?

Photos taken this week in the mega-housing project of Huaguoyuan in Guiyang. Photos: ImagineChina

A pair of skyscrapers bearing an uncanny resemblance to the ill-fated World Trade Centre in New York stand – half-completed – in downtown Guiyang, the capital city of China’s Guizhou province.

The towers, set to be 406 metres tall upon completion, are part of a mega-housing project which features a luxury shopping mall, an amusement park and even a wetlands reserve.

It’s a grand effort by a government-backed developer to attract around 500,000 residents – equivalent to 11 per cent of the city's total population of 4.5 million.

There is just one problem: experts fear that this 90 billion yuan (HK$113 billion) housing project will turn into yet another ghost town.

Stunning – but empty – housing complexes are hardly unusual in the southwestern province, which at 176,000 square kilometres is roughly the size of US states Missouri or Oklahoma.

As of last year, 16 mega-projects, each with more than 1 million square metres of total saleable area, had been built or were under construction in the provincial capital alone. Together, they provide enough housing for more than one fourth of the city's existing population.

The unprecedented proliferation of massive construction projects in provincial capitals like Guiyang, Wuhan, Nanjing and Hefei has triggered intense debate among academics, property moguls and policymakers about whether these cities are producing more and more ghost towns.

Unlike ghost towns in the West which are laid waste by wars, natural disasters, disease or failed economies, the ones in China are created out of haphazard and rushed projects by local governments attempting to boost GDP growth and reach urbanisation targets.

Media from our September 2013 feature story 3,000 villas, but no one’s home in the ghost city of Jingjin situated between Beijing and Tianjin

Housing revenue is a key pillar of China’s economy. The latest data from the national statistics bureau show that nearly 12 per cent of China’s GDP in 2014 came from new home sales, a similar level as the previous year.

This is higher than mature markets like the US, which maintains a ratio of 10 per cent, according to brokerage CLSA’s property research. Even Hong Kong, where property is a key wealth investment, housing contributed 8 to 9 per cent to the economy at its peak between 1997 and 1998, right before the property bubble burst.

But as much as local governments want to profit from vast land, there are many failed “new towns” in China’s third-tier cities, a classification that includes 74 small-and-medium sized cities with relatively robust economies, as there often aren't enough jobs or opportunities to attract a sustainable inflow of migrants.

While Guiyang, with better welfare and infrastructure than the rest of the province, which is China's poorest by per capita GDP, could attract migrants, it will not be a high enough influx in the short-term.

Cities like Sanya, Changzhou, Ganzhou and Wenzhou are also filled with vacant buildings or unfinished housing projects. At night, these buildings plunge into an eerie darkness save for a few lights – a sign that few people live there.

Sanya may be a popular coastal hotspot, but the tourists constitute a largely transient population. Other less developed cities fail to attract people because they are too remote, cold or do not offer enough economic opportunities.

Nevertheless, a study of 12 provinces showed that 133 out of 144 prefecture-level cities and 67 out of 161 county-level cities in China were planning on the “new town” constructions over the next few years, media reported in 2013.

“Overall, you need to be careful about the search for ghosts. People are too eager to find ghosts and are likely to label any place a ghost city” Zhu Xiaodi, former fellow at Harvard University’s Joint-Centre for Housing Studies

Overzealous urbanisation has raised speculation that the list of ghost towns will continue to grow, as the central government reins in speculative buying and property prices.

CLSA last year published an in-depth analysis on China’s ghost towns and projected that small Chinese cities would get even emptier in five years.

The CLSA report was based on an on-the-ground study of 609 construction projects in 12 Chinese cities.

It found that the average vacancy rate in China for property completed between 2009 and 2014 was 15 per cent – equivalent to 10.2 million empty units – which on the surface is nothing to worry about considering the US vacancy rate stands at 10 per cent.

“The bigger concern is the 17 per cent vacancy rate in remote, low-value properties,” the report said.

No official Chinese government data has been released on vacancy rates in cities, and experts and scholars have yet to reach consensus on the best scientific formula to calculate this.