Property Sale Slump In China! Crisis Is Everywhere

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S&P Global Ratings is expecting a fall in the national property sales to 28%-33% this year in the world’s fastest-growing economy. On Thursday, a billionaire index released revealed that Asia’s richest lady lost more than half of her wealth the previous year as China’s liquidity constraint shook the real estate market.

Gravitas: How Asia’s richest woman lost 50% of her fortune | WION

In June, Chinese home prices declined for the tenth consecutive month, highlighting how the government’s relief attempts are failing to stop the nation’s worsening real estate crisis. The growing situation has acquired attention in the wake of last week’s report that unsatisfied apartment purchasers at building developments in more than a hundred locations had united in withholding payments on unfinished residences.

Some well-known developers have already declared bankruptcy and shook the global financial system. Most notably, the nation’s second-largest real estate company, Evergrande, confessed that it could not pay a portion of its $300 billion debt mountain last year.

For those already struggling with severe cash flow issues, the strike has increased the strain on developers & relies on buyers making upfront payments for homes off the plan to keep money moving through their operations. The loss of this income will be disastrous because the revenues might be utilized to pay debts as well.

Another research by the agency puts the estimated value of the loans in question at almost 1tn yuan ($144bn) & could threaten financial stability if there was a sharp drop in prices. 

Local land sales are also affected as a result of the property downturn and the country’s draconian zero Covid policy. In the year’s first half, local land sales revenue declined sharply by 31% year-on-year. Excluding state-subsidized housing, new home prices in 70 cities slipped 0.1% from May when they sank 0.17%. 

China property sales could plunge by 30% as crisis deepens | Latest English News | WION World News | WION

Sales & prices are under pressure to decline as a result of the economy’s slowdown & growing unemployment. Recent events have clearly rattled Beijing. According to Communist Party theory, societal stability is influenced by the real estate market’s stability. In the world, Chinese real estate is the largest asset class, and many investors fear that a rapid decline in prices might have larger ramifications for the entire economy.

In a separate statement on the company website, Evergrande said company sales have “gradually restored” since March as homebuyers regained some confidence after it guaranteed home delivery.

The $2.4 trillion Chinese real estate market is not showing any signs of recovery, which is making matters worse for the economy, which barely increased in the third quarter. There are indications that an increasing number of homebuyers are refusing to make mortgage payments for unfinished flats, which is spreading to the banking system. Investors are frightened, and Chinese bank shares and property bonds are falling as a result.

In order to understand the effects of the house loan rejection, authorities convened emergency discussions with banks this week, according to sources with knowledge of the situation. Due to building delays and worries about price declines, buyers of at least 100 projects in more than 50 locations have ceased making payments.

The crisis affecting Chinese builders is entering a new stage as debt selloffs are now affecting companies that were formerly thought to be immune to the financial crunch, such as Country Garden Holdings Co., the country’s largest builder by sales.

Following the revelation of gloomy Q2 growth numbers that were the weakest since the beginning of the Covid-19 outbreak, analysts cautioned that the sector is trapped in a “vicious cycle” that will further erode consumer trust.

ABHIJEET ANAND

Sociologist, Engineer, and Content writer

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