Crisis-hit city reveals how cruel China’s housing boom can be – with potential to drag down entire economy

If you take a drive through the city of Zhengzhou evidence of a crisis is everywhere you look. 

Block after block, shell after shell of unfinished developments.

This city is the worst affected place in a country with a major housing market plight. It has the potential to drag down the entire economy.

On the city outskirts, the village of Da Wang Zhuang is a case study of sorts for just how cruel the Chinese housing boom can be .

Not long ago it was almost entirely farmland and home to some 200 households.

But many people here did a deal with a developer – their land in exchange for new homes in the high rises that would stand where their farms had once been.

They were told the building would take three years, but eight years later, with their old homes long gone, they are still waiting.

There is a modest compound of temporary accommodation in the shadow of the unfinished blocks.

Here the elderly and more vulnerable can live while they wait, but the younger and more able have to rent elsewhere.

It’s in this compound we meet Wang Fong and her mother.

‘We have no idea how many more years we have to wait’

The space they have here is small, there is only space for the two grandparents and occasionally one of Wang Fong’s sons.

It has mould growing all over the walls, it has rats, she says, and is significantly worse than what they gave up.

“It’s too small,” she says.

“It would have been better to stay at our own home.

“Places like ours, the more you develop it, the poorer it is.”

To add to her difficulties, she also lost her job in the pandemic and was widowed three years ago.

She is a single mother, struggling to find work who now needs to care for both her children and her ailing parents.

“We have no idea how many more years we have to wait,” she says.

“We just have to wait patiently. The developer does not have any money, the house cannot be built.

“Of course I’m anxious. If you rent a room you have to pay the rent, don’t you?”

Shattered lives

Outside the village there are remnants everywhere of people’s shattered lives.

Construction on a major highway was started and it now literally stops midway through what was once the village.

No one has cleared the vast amount of rubble around it .

But cases like this this are far from isolated in China.

For years developers have over-leveraged themselves to satisfy a seemingly insatiable appetite.

The housing industry in fact underpins a fifth of Chinese GDP – it’s been encouraged as a huge driver of the country’s astronomic growth.

But in the face of the zero COVID measures, a drop off in confidence and tightening restrictions from the government, many of these developers came close to collapse and defaulting on those debts.

The industry had its worst year in recent memory, sales plunged and home prices fell for 16 months straight through to December.

It meant construction across the county was paused and buyers left in the balance.

Nowhere to go but unfinished, unsafe homes

Some were already paying mortgages on the unfinished homes and many took to the streets and withheld their payments in protest.

Others with nowhere to go moved in to unfinished, unsafe blocks.

The government responded with a package of stimulus measures and loosening restrictions, the focus it said should be on restarting stalled developments.

But while this has meant some constructions have resumed, others, it seems, have not.

In some places people believe that developers are sending just a handful of workers to maintain the appearance that construction is continuing.

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In Da Wang Zhuang we met one old lady who thinks this.

Despite being 68 years of age, she doesn’t qualify for a house in the compound for the elderly and is now paying rent for her seven-strong family – an outgoing she didn’t have before her home was demolished.

Now she has to litter pick to make ends meet.

“You have to earn some money, my grandchildren have to eat,” she says.

“How come it (the tower block) is just not finished? Six or seven people renting a house is a big expense. There is no transitional allowance, no living allowance, nothing!”

Highly vulnerable market – but people are still investing

But despite all that’s happened people are still investing; such is the obsession with property here.

Just round the corner we spoke to a man who works for another developer constructing another block. He insisted people should have faith in the market .

“I do not worry, it is ok,” he says.

“The problems developers had were due to the tightening financing environment, but the financing environment has been relaxed since the beginning of last year.

“Additionally, the government is now attaching a lot of importance to the work of ensuring timely deliveries of presold homes.

“The regulation of funds is stricter than before. We feel more reassured than before.”

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Getting the economy restarted after the ravages of the zero COVID-19 rules is arguably the single biggest task facing the leaders of China’s ruling communist party – and there is much work to do as Xi Jinping begins a third unprecedented term as leader.

But the housing market could well be one of the biggest obstacles to this.

The problem is that while stimulus packages might alleviate some pain in the short term, they do not fix the underlying problem: a significant housing bubble and a market highly vulnerable to boom and bust.

There is still a deep systemic problem here, and it’s people that are paying for it.