Forced to Live In Unfinished Apartments, China’s Real Estate Collapse Is Making People Desperate

This viral video shows just how rotten China's economy really is. Welcome to China Uncensored, I'm Chris Chappell. This video is going viral in China right now. The narration calls it the most heartbreaking story of a homeowner in all of China. The building was unfinished for years, but the owner is still forced to pay a huge mortgage. So he renovated his own apartment and lives in this abandoned building. Ok, it's not great, but I wouldn't call it heartbreaking. Sure, he doesn't have heat or running water, but he doesn't have to deal with any neighbors. And look at the views! Perhaps living in New York for so long has given me a warped view on apartment living. Anyway, this homeowner situation is not unique. But before I get into that, this episode was made possible by my China Uncensored 50 Cent Army. They're the team of viewers who suggested this episode and who make the entire show possible. Want to join? Stay tuned to the end for something special. Anyway, these kinds of abandoned buildings have become so common in China, there's a new term for them. They're called rotten-tail buildings. It's like a project that starts off well, at the head, if you will, but by the time it gets to the tail, it's rotten. Abandoned. Unfinished. Chinese can be such a descriptive language. And yes, people are living in these rotten-tail buildings. Here's a video of homeowners showing a vlogger how they live in an unfinished building in Guizhou province, carrying in jugs of water and climbing ladders to get to their apartments. Other videos show homeowners trying to finish the construction themselves after the buildings were left unfinished for almost four years. The buildings in these videos were originally built by Evergrande, the real estate company that collapsed back in 2021 and triggered China's real estate crisis. The buildings were abandoned when Evergrande went bankrupt. Side note, China recently sentenced the founder of Evergrande to life in prison. So yeah, the real estate market is not doing well. But you know what is inspiring? When people don't let their troubles get them down. Always look on the bright side of life. Look, these homeowners are so excited to be moving into their unfinished building, they threw a housewarming party. And they were so happy, they just burst into revolutionary song. What are the police gonna do? Stop these patriotic residents from praising the Communist Party? I love it when people use sarcasm to fight the CCP. Although these videos are going viral, people living in unfinished buildings isn't a new phenomenon. Back in 2022, a BBC reporter spoke to people who were living in this unfinished building in Xi'an. They told him there were 100-200 people living there, with no toilets, spotty electricity, and no running water. And just to be clear, these aren't people who are just squatting in these unfinished apartments. These people have already paid hundreds of thousands of yuan for these apartments. And they've been paying mortgages for years, all while waiting for buildings that may never be finished. So if the buildings aren't finished, can't people just get their money back? It's not that easy. They'd have to sue the developers, and the court cases aren't going anywhere. Which is why some people are taken to the streets. The point is, these people are putting a good face on it, but living like this isn't something you do unless you're pretty desperate. People live in these unfinished buildings because they can't afford to keep paying their mortgage and also pay rent to live somewhere else, with running water. After watching a bunch of these videos, I'm pretty sure New York City rats have a better living situation. It's impossible to know how many people are living like this. Chinese authorities won't even publish numbers on how many of these pre-sold unfinished buildings exist. This is the closest we have to a number. Back in 2023, Japanese investment bank Nomura estimated that there were 20 million unconstructed and delayed pre-sold homes. Which would cost around 440 billion dollars to finish. And with the collapsing market, real estate developers don't have that kind of money. The CCP knows this is a problem, and they're trying to fix it. I'll tell you how, but first you need to know how we got here. If you understand China's real estate boom and bust, you'll understand the fundamental weakness in China's economy. If you've been watching China Uncensored long enough, you may remember me talking about nail houses. These were houses that were left standing when the owners fought the local government's attempts to demolish them for land development. Which led developers to do things like digging a giant ditch around the house to force the owner to move out. Or the government might build a road around the house and cut off electricity and water. In the end, the nail houses would all be demolished. But what's fascinating is how nail houses led to rotten-tail houses. It all has to do with land financing. You see, in China, the state basically owns all the land. If you buy land in China, you're just buying the rights to use the land for usually 70 years. In the 1990s, a series of reforms allowed local governments to collect land use taxes. And even more importantly, they could profit from selling land use rights to developers. Local governments didn't have a lot of other ways to raise money, so they had a big incentive for land prices to go up. Also in the 90s, people were allowed to buy homes for the first time. Up until then, people were assigned housing by their work unit. So all of this created China's modern real estate market. And it very quickly became a huge real estate boom. As more people moved to the cities for work, there was more demand for housing. Apartment prices rose. Land prices rose. Buildings went up. When people had more money, they kept buying more real estate. That's because they didn't really have anywhere else to put their savings. prices rose. Land prices rose. Everyone was happy. And then too many people got greedy. Developers borrowed heavily to buy more land. Demand was so high that people were buying homes that hadn't been built yet. In 2021, 87% of new homes were sold while still under construction. To be competitive, people were putting 50% down. Homeowners had to start paying their mortgage right away, even if the building wasn't finished. All their money was tied up in real estate. Developers were promising too much and running out of cash. They borrowed even more money. They had huge debts. Instead of using the presale money to finish building the apartments people had bought, they were using it to pay their creditors, or even to finish previous buildings. It was like a giant Ponzi scheme where your money would be used to just keep the real estate company afloat. Or you could think of it as a game of musical chairs, because in 2020 the CCP stopped the music and took away the chairs. They put in place a three red lines policy that restricted how much property firms could borrow. And then, without enough money, the company started to default on their loans. And one of the biggest, Evergrande, collapsed. Over the last five years, the real estate crisis has devastated China's economy. Remember I said that people in China put most of their savings in real estate? About 70% of household wealth in China is in real estate. That's double what it is in the US. So when real estate prices fall by a third or more, that's really bad. In fact, according to the Bank for International Settlements, China's property downturn has wiped out an estimated 18 to 20 trillion dollars since 2021. The CCP is trying to fix things. They're pressuring developers to finish these rotten-tail buildings. And since developers don't have the money, they're giving them government loans to do it. They're tightening rules on what developers can do with presale money. And a new rule says that people don't have to start paying their mortgage until the apartment is finished. What a revolutionary idea. But it's not clear these new rules will fix the problem. And officials are having a hard time encouraging people to buy real estate again. For example, they just rolled out a new 40-year mortgage to lower costs. But homebuyers remain reluctant to borrow. Meanwhile, China's real estate crisis remains the biggest weakness in the economy. Falling property values are a huge reason households aren't spending. And that's why retail sales are barely growing. It's why China is stuck in a deflationary spiral, and why local governments are broke and racking up huge amounts of debt. China's rotten-tail buildings are leading to a rotten-tail economy, fueled by debt, stalled halfway, and draining people's wealth. If you enjoyed this episode, you should know it was inspired by suggestions from my 50-cent army. Those are the fans of China Uncensored who make it possible for us to do the show by subscribing on our website ChinaUncensored.tv. If you'd like to see your idea become a China Uncensored episode, come join us. Seriously, join us. You don't know what you're missing. And for a limited time only, if you join with an annual premium or VIP subscription, you get this exclusive, for legal reasons I can't call it Lego even though it's made of Lego bricks, Tank Man. Put Tank Man on your desk at work. Put it in the background of your Zoom calls. Bring it to your next family dinner. Have fun with it. And you'll also be supporting China Uncensored directly. That's critical, because without your support, we could not make this show. 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