The paradox of China’ second homes

In 2007, 82% of China’s urban population consisted of homeowners, and 11% also owned a second home.  From a European point of view, this figure is huge; for instance, there are “only” three million second homes in France.  So should we conclude that members of the Chinese middle class are more likely to buy a second home than their European counterparts? The question is whether this phenomenon reflects the same reality in China as in Western countries.   Huang Youqin and Yi Chengdong’s article1 clearly shows that the large number of second home owners in China mainly results from economic transition.

Resort construction in Haikou, Goulard SébastienCertainly, as a result of increasing incomes, some Chinese can afford a second home to spend their holidays in attractive and sunny regions and to experience of a westernized way of life. This is particularly true in the southern province of Hainan, where holiday villas have mushroomed over the last few years. Some Chinese have purchased multiple homes as profitable investments because of rising property prices. The authors note that without property tax, maintaining a second home does not require a lot of money.

According to the authors’ studies, the second home phenomenon in China is mainly the consequence of the transition from a socialist to a market-type economy.

  • Recent reforms in the housing sector have led to the privatization of public housing. Residents have been able to buy their homes for a very low price from the government or from work units (which explains the high rate of homeownership in Chinese cities). However, they have not been granted full ownership rights for their housing, only partial ones.  This means that they are not allowed to easily sell their properties on the private market.  So these residents have more financial resources (savings) to purchase another home, but find it difficult to dispose of their purchased public housing.
  • Despite the increasing marketization of the housing sector, some work units and administrations still allocate housing to their employees. Thanks to these allocations, these privileged renters can save more and can more easily afford to buy a second home.  
  • The migrants’ situation is even more paradoxical. Because of the hukou registration, rural migrants are not eligible for subsidized housing from municipalities or work units. Few of them can afford to buy apartments in cities on the private market. As a result, most of them rent their home in urban areas. Even so, more than 30% of migrants are second home owners. Rural migrants still own agricultural lands in their home province that they are not allowed to sell on the private market. They consider their second homes in their native province as a kind of insurance In case they do not succeed in integrating their new urban life.

These different situations lead to what by Western standards seems an unusual result: many second home owners rent their main home. The authors also mention that the second home issue illustrates the growing inequalities among urban residents.   They argue that this situation is not sustainable and that China will have to thoroughly reform its housing policies.

Huang and Yi offer some recommendations to the Chinese authorities. First, they call for the creation of a housing tax and sound investment opportunities for the middle class, in order to reduce real estate speculation.

They also believe that the authorities should terminate the registration system (hukou) and accord the right to sell or exchange agricultural land.

They also claim that subsidised and allocated housing fails to perform its intended function, that of assuring that the rural migrants are the first to benefit from the scheme. This policy would accelerate their integration into urban centres.

This article succeeds in pointing out a blatant inequality in Chinese cities: whereas some Chinese must confront obstacles in the search for cheap and convenient housing, others can afford a second home. However, this inequality is not entirely the result of the market economy, but also of a socialist legacy, which created different categories of residents according to their urban or rural status. A better programme of housing allocation that would give priority to poor migrants (the solution suggested by the authors) would not only reduce this inequality but also be an answer to the “urban villages” and the real estate boom Chinese cities have experienced. Thus, transferring subsidized housing from urban second home owners to migrants would reduce the housing shortage and provide solutions for related issues.  

  1. Huang, Youqin & Chengdong Yi, 2011 “Second home ownership in transitional Urban China”. Housing Studies, 26(3), pp 423-447. []

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE - Nottingham Trent University)

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