The once booming Chinese real estate market is starting to cool down

A year ago, the business was for Liang Jiaoui, a real estate seller in Zhanjiang, a port city in southern China.

He could sell three apartments a day without much of an arm me. Mr Liang admitted that the apartments were fairly public, but the new complex of buildings – in an upcoming neighborhood not far from a high-speed rail station – was enough to attract buyers.

Then came a sudden reversal of fortune. The real estate sector in China started to crumble under The weight of her huge debt. What was already shaping up to be the country’s worst housing market in years was dealt another blow when a new type of coronavirus emerged Extensive shutdowns It brought the economy to a standstill.

The turmoil has slashed new home sales and lower property prices for the first time in years, threatening the prospects for an already fragile economy that has become dependent on housing for job growth and business spending, and jeopardizing the outlook for the fragile economy. An important investment for millions of Chinese families.

So far, China’s efforts to revive the housing market with low mortgage rates, easier credit, subsidies and relaxed regulations have not succeeded. In April and May, new home prices fell More than half of the 70 largest cities are in China For the first time since 2016, sales of these properties are down nearly 60 percent.

Zhanjiang, a port city of seven million peopleAnd the It experienced some of the biggest price drops among the major cities. Mr. Liang said he only sold five apartments in April. May was worse.

“The prices have come down, but the enthusiasm for home buying has not returned yet,” Liang said. “The economy is not good, and the continuing impact of the epidemic has completely changed the situation.”

With China slowly emerging from restrictive lockdowns, the country is focused on preventing an economic slowdown. Last month, the Prime Minister, Li Keqiang, called an emergency meeting and issued a serious warning More than 100,000 officials say businesses and local governments need to act with “clear urgency”.

The real estate sector is a huge and important lever. Since China began implementing reforms in 1988 for commercial housing, real estate has become a pillar of a rising economy. By some estimates, it explains About 30% of China’s GDP After accounting for related industries such as construction and property management.

Property also has profound significance in Chinese society. For young people who want to get married, owning a home is a must before starting a family. Instead of investing in stocks and bonds, Chinese households allocate most of their savings to real estate — at more than twice the rate of Americans.

Also, the damage to real estate prices could spread to the economy by eroding how much Chinese shoppers are willing to spend on appliances, clothing, jewelry or cars.

With the economy at a standstill, Beijing is trying to get people to buy property again.

the government beta program suspended To apply for property taxes in March. Last month Chinese banks Lowering mortgage costs By the largest amount since the new interest rate regime was put in place in 2019.

In addition, many local governments have launched dozens of new policies to promote home buying. Meishan, a city in Sichuan Province, said it will provide subsidies for the purchase of new homes before the end of the year. The government of Wenzhou, a city in Zhejiang province, said it will now allow interest-only payments for the first three years on mortgages for first-time home buyers. Huainan, a city in Anhui province, has ordered banks to extend more funds and shorten loan approval periods, as well as lower mortgage rates and down payment requirements for first-time buyers.

For some potential homebuyers, incentives are not enough to offset the risks.

Cao Jingyu, who works for an outdoor furniture company in Shenzhen, said a lower down payment only means more bank payments over time. She said that due to the fragile state of the economy and the ever-present possibility of layoffs, she did not want to confine much of her money to a home.

Earlier this year, she almost bought an apartment in the northern part of Shenzhen. After making a deposit on a home under construction, I hesitated when I noticed that only 20 percent of the units had been sold. At the last moment, she backed out.

Ms. Kao, 30, said: “I’m still worried about the big risks of buying a house. When I want to sell the property, can I get rid of it?”

A year ago, concern about China’s property market was not from reluctant buyers but frantic speculators. When Shenzhen property became available in March 2020, the building number reached 288 units Sold out online in seven minutesaccording to state media.

Chinese officials, concerned about the housing bubble and its impact on the financial system, enacted the so-called Three red lines A policy to curb the reckless borrowing habits of the country’s largest real estate developers.

New rules, which require companies to repay debts before they can borrow more money, are beginning to expose cracks in the property market. In late 2021, China Evergrande Group, a debt-laden property developer, defaulted on bond payments to creditors. Since Evergrande, more than a dozen companies have defaulted on their debts.

Amid debt problems, Chinese officials have pushed developers to prioritize finishing construction on properties they have already sold. But cash-strapped companies’ rush to complete projects has raised a new set of problems: protests over shoddy work.

When Evergrande began having liquidity problems, an estimated 1.6 million people were waiting for the developer to complete homes they had already purchased.

He Qiang, a 27-year-old auto salesman, bought a property in Evergrande in 2019 with an expected completion in 2021. It has been delayed until June.

El-Sayed said he did not think the latest deadline was realistic. The apartments are still without electricity. Lifts are unfinished and no wood floors installed.

Problems have already been noted. Window leaks. The outdoor spaces are wide driveways for cars only, and have no sidewalks for residents. There are no bushes or trees, just bare patches of grass.

When Evergrande scheduled a party for the building, residents protested and the event was canceled. The developer told the residents that there was no money for anything else.

“We were told not to be overly demanding. There are still many people who have not been able to finish their apartments,” said Mr. He.

Evergrande did not respond to emails seeking comment, and phone numbers listed on its website have been disconnected.

People all over the country are protesting against quality problems and unfulfilled promises.

Louis Lee, a 38-year-old administrator at a real estate company, bought an apartment in 2019 in the “Moon on the Sea” complex by Vanke, one of the country’s largest real estate developers. She was told that the complex in Guangzhou would eventually include a shopping center with groceries and an international school – a major selling point for Ms. Lee, who has two young children.

But more than a year after she moved in, the school building and mall remain empty. Residents said Funke told them there was not enough interest from companies to fill the mall, and that the school’s application was tied up in the government bureaucracy.

The local district challenged this version of events. Residents reported that Funke had not paid rent for the land in recent years due to a financial dispute with the village that owns the land. After taking the matter to court, Funke eventually paid, but there are currently no plans to set up an international school.

In April, angry homeowners hung a banner covering the top ten floors of the high-rise that read,Funky False AdBased on photos of residents. Other signs warned people that buying a Vanke home would “destroy their lives.” When police arrived to ask homeowners to remove the signs, protesters refused and clashed with officers. Vanke did not respond to emails seeking comment. .

Ms. Lee regrets buying the property. It says the financial issues facing developers lead to quality issues.

“Personally, I don’t recommend buying apartments now,” Ms. Lee said. “People should really think twice.”

Claire Vaux contributed reporting and research.