The once-booming real estate market in China has taken a drastic turn in recent years, with a sharp loss of faith in property among Chinese consumers. The unwavering belief that real estate was a can’t-lose investment has been replaced by the belief that it has become a losing investment, leading to a growing problem for Chinese policymakers. The troubles of the country’s real estate sector were laid bare when a Hong Kong court ordered China Evergrande, one of the country’s largest property developers, to wind up operations and liquidate the company, which is burdened with over $300 billion in debt.
The downturn in the real estate market has been prolonged and is accelerating. Housing sales fell 6.5 percent in 2023, with sales in December alone down 17.1 percent from a year earlier. Real estate development also fell 9.6 percent last year. The debt woes of property developers have caused buyers to stay away and pressure home sales, while the lack of new business has deepened the financial problems of these firms.
In response to the crisis, China has walked back many of the restrictions put in place to cool the real estate market several years ago. Financial regulators are now urging banks to lend more to property developers. However, even with these easing of rules, the market has not seen improvement. Outstanding mortgage loans fell 1.6 percent last year, marking the first decline in almost two decades.
The property slump has created a cause for concern among potential home buyers, with many projects left unfinished. Despite the government’s push for firms to complete construction on presold apartments, there are still many projects that remain incomplete.
Opinion on the topic is divided, with some, like 19-year-old college student Nydia Duan, expressing reluctance to invest in the current property market. Duan’s preference is to keep her family’s money in cash, citing her pessimism about the outlook for real estate and her reluctance to buy until the property market is more stable.
In summary, the current state of the real estate sector in China is experiencing a severe downturn, with consumers and potential investors showing a sharp loss of faith in the market. Despite efforts by policymakers to revive the industry, the challenges facing the real estate market continue to persist.