Chinese Homebuyers Lose Faith in Real Estate as Market Crumbles
The once steadfast belief of Chinese homebuyers that real estate was a safe and reliable investment has been shaken as the country’s real estate sector faces a tumultuous period. Over the past two years, the industry has seen a sharp decline in new home sales and a rise in businesses struggling under massive debt, causing Chinese consumers to lose faith in real estate as a source of wealth.
This loss of faith in property as a stable investment has become a growing concern for Chinese policymakers, who are striving to revive the struggling industry with minimal success. The issues were brought to light on January 29 when a Hong Kong court ordered China Evergrande, a major real estate company with over $300 billion in debt, to cease operations and liquidate the company after limping along for two years following defaulted payments to investors.
The economic downturn, now the longest on record, has seen a significant drop in home sales with a 6.5% decrease in 2023 and a 17.1% fall in December compared to the previous year. Real estate development has also fallen by 9.6% last year according to Dongxing Securities, a Chinese investment bank.
In an effort to stabilize the market, Chinese financial regulators are encouraging banks to lend more to developers. This comes as more than 50 Chinese real estate companies, including major players like Evergrande and Country Garden, have defaulted on their debt payments since 2021.
Despite efforts to cool the real estate sector in previous years by limiting home buying by speculators and imposing large down payments, the loosening of these restrictions has not provided the expected boost to the market.
Concerns over the large number of unfinished and pre-sold apartments have led potential homebuyers like Nydia Duan, a 19-year-old college student in Guangdong province, to remain hesitant about entering the market. Duan reflects a larger sentiment among Chinese consumers, stating, “I’m still reluctant to buy one. I will consider it when the housing market is more stable.”
As the Chinese real estate market continues to struggle, the loss of faith in property as a secure investment poses a significant challenge for the country’s economy and policymakers.
Written by DAISUKE WAKABAYASHI and CLAIRE FU
BBC-NEWS-SRC: IMPORTING DATE: 2024-02-12 22:18:03