Large-scale unsold apartment complexes across China's small and mid-sized cities are being repurposed as cheap rental housing. Analysts say the new towns that once symbolized China's property boom are now becoming examples of collapsing home prices and shrinking populations.
"Build It and They Will Come"—but Half Sit Empty
The Financial Times (FT) recently highlighted a large apartment complex called "Prosperous Lakeside Mansion" in Huizhou, Guangdong province, near Hong Kong, as a representative case. Located in Huizhou, a city of about 6 million people, the complex is roughly half empty, and as rents have fallen sharply, more young people and remote workers are seeking it out.
The complex was completed in 2021 but ran into a market downturn just after China's property bubble burst. Its developer, Laishen Real Estate Development, like other property firms, could not withstand falling home prices and a funding crunch, and entered debt restructuring procedures.
In the past, Chinese local governments actively approved large-scale housing development under the logic that "if you build the apartments first, people will follow." A structure formed in which local governments boosted economic growth and tax revenue through property development, and local officials used this as a track record for promotion.
But the situation has changed. While first-tier cities such as Beijing, Shanghai, Shenzhen and Guangzhou attract population based on high-tech industries, many third- and fourth-tier cities are seeing empty apartments increase as oversupply and population decline proceed simultaneously.
The FT diagnosed that "as a result of supplying too much housing too quickly, the large-scale development projects that were expected to become future growth engines are failing to secure residents."
"People Prefer Older Homes Over New Ones"—Property Slump to Continue
International credit rating agency Fitch Ratings, in a report released on the 30th of last month, said China's property market recovery is slower than expected and revised down its forecast for this year's new home sales to a decline of 11-13 percent, from a previous decline of 7-8 percent. It judged that despite the government's property stimulus measures and the easing of default risks among developers, the momentum for market recovery is still lacking.
In fact, sales of newly launched homes fell 14.1 percent in January-May this year from the same period a year earlier. Although the decline temporarily narrowed in April, it widened again in May, and Fitch forecast that a decline of 9-12 percent would continue in the second half.
Market polarization is also deepening. While first-tier cities such as Beijing and Shanghai have relatively stable prices centered on real demand, small and mid-sized cities have not escaped the slump. In addition, the share of existing-home transactions in China's 30 major cities has risen to an average of 69 percent this year, delaying the recovery of the new-home market. Fitch analyzed that consumers continue to prefer existing homes due to concerns over delayed occupancy of unfinished apartments.
It also assessed that government support measures such as urban redevelopment, renovation of aging housing, and "trade-in of old homes for new ones" help lower down-payment and loan burdens but are insufficient to restore market confidence. In January-May this year, housing development investment fell 15.6 percent and newly started construction area fell 23.4 percent.
Fitch forecast that "the polarization of China's property market is highly likely to continue," adding that "it is difficult to rule out the possibility of a further decline in new home prices and sales area even in 2027."
