And the recovery has not been evenly dispersed. Prices have roared back in bigger cities like Beijing and Shanghai. In second-tier cities, like Nanchang, the rebound has been more muted, and even nonexistent in smaller cities.
China’s housing problems are more pronounced outside the top cities because overbuilding has been more pervasive in smaller cities, according to a paper from Kenneth Rogoff, an economics professor at Harvard, and Yuanchen Yang, an economist at the International Monetary Fund.
Dr. Rogoff said that China’s housing boom was predicated on “fast growth forever,” but that in many smaller cities, the economy had not kept pace with the housing build-out.
“China has been building real estate and supporting infrastructure at a breakneck pace for decades,” he said. “Eventually you run into diminishing returns.”
China’s housing boom started in the late 1990s in the biggest cities before spreading to smaller urban areas like Nanchang in the 2000s. In 2000, China built around two million apartments. By the mid 2010s, it was building more than seven million apartments a year. Real estate quickly became the backbone of China’s economy, accounting for around a quarter of all activity.