Real estate in China

Main article: Economy of China

2024

Decline in real estate sales and prices continues

Real estate sales of the top 100 developers in China from 2020 to mid-2024 collapsed almost 3 times, and the largest steel producer in China announced the worst crisis in the industry. Half of the largest developers went bankrupt, but this still does not prevent real estate prices in China from remaining high (at least according to official statistics) and competing with prices in American megacities.

Prices for new residential real estate in Beijing in comparison with 2020 remain higher by almost 12%, and in Shanghai growth is almost 32% in less than 5 years.

The fall in sales of developers is largely due to a decrease in sales of square meters themselves, but the growing price in the largest cities helps to significantly mitigate the crisis in the real estate sector in the largest cities.

The mortgage rate in Shanghai for the "primary" 3.5% and the down payment is 20%, for the "secondary" the rate is 3.9% and 35% for the down payment.

Of course, for the "secondary" the situation is more difficult, and official statistics are less transparent: government agencies in 2023 report an increase of + 5% in 2 years, while brokers and realtors point to a fall of 10-30%.

As of October 2024

The ratio of apartment price to income in China's largest metropolitan areas is similar to the figures seen at the peak of Japan's real estate crisis in the 1990s.

In addition, the home ownership ratio in China is 90%, which generally limits further demand from the consumer, except for investment goals.

Shares of Chinese companies in the real estate market returned to their 2008 lows, according to Bank of America.

Lower minimum down payment on mortgages to accelerate sales of large unsold housing

In May 2024, China announced the easing of mortgage lending rules and encouraging local authorities to buy unsold houses from developers to turn them into affordable housing.

The Central Bank of China effectively abolished the nationwide minimum interest rate on mortgages and reduced the minimum down payment to 15% for first-time home buyers and 25% for second-home buyers. Previous ratios were 20% and 30%, respectively.

2023

Continued sales decline

Monthly sales dynamics of the 100 largest developers in China year-on-year

Contribution of real estate and high-tech sectors to China's GDP

Chinese property tycoons' fortunes plummet

2022

Drop in real estate investment by 10%. For the first time since 1999

On January 17, 2023, the National Bureau of Statistics of China (NBS) reported that real estate investment in the country decreased for the first time in the history of market analysis. This is also due to the difficult economic situation.

Financial investments in real estate in the PRC in 2022 fell by 10% on an annualized basis. This was the first decrease in the indicator since 1999.

Real estate sales by area decreased in 2022 by 24.3% compared to the same period in 2021. Thus, the maximum reduction in the market for the entire time of collecting statistics was recorded - since 1992.

In 2022, the volume of new construction in terms of area decreased by 39.4% on an annualized basis. At the same time, funds raised by Chinese developers fell by 25.9%.

China real estate investment falls for the first time in a year

According to NBS, 2022 year the total retail sales of consumer goods in China reached 43,973,3 billion yuan (approximately $6491.3 billion at the exchange rate as of January 18, 2023), which is 0.2% less than in the previous year. At the same time, price increases were recorded in many product categories. Thus, the cost of food, tobacco products and alcohol increased by an average of 2.4%. Clothing rose by 0.5%, housing - by 0.7%, goods and services for everyday use - by 1.2%, transport and communications - by 5.2%, education, culture and recreation - by 1.8%, medical services and health care - by 0.6%.

China's National Bureau of Statistics also reports that the country's population has declined in 2022. It amounted to 1.412 billion people, which is 0.85 million less than at the end of 2021. It is noted that the foundation for the restoration of the internal economy of the PRC is not solid, since the international situation is still difficult and difficult, and the existing difficulties in the country have not been completely eliminated.^[1][2]

China demolishes residential skyscrapers over government's intention to limit supply

On August 23, 2022, it became known that China is demolishing multi-storey buildings and suspending the construction of residential buildings, which are designed for 75 million people, as the Xi Jinping government attempts to stimulate the country's stagnating real estate market.

According to financiers, Beijing adheres to the policy of "build, suspend, demolish, repeat," since the Chinese government intends to limit the volume of supply in order to prevent a sharp collapse in housing prices, and contribute to the growth of economic activity by increasing construction volumes.

Residential skyscrapers are being demolished in China

Fathom Consulting found that in recent years, about 3 billion square meters of living space has been mothballed or demolished, as a result of which the property does not go on sale.

Joanna Davis, head of China's economy at Fathom, said it takes an average of about eight years to build residential buildings as supply "enters the market by drip."

The key political tool for regulating the volume of supply is the order on the conservation of real estate at the stage of construction of the facility. Such policies contribute to a steady increase in the volume of housing under construction, which helps support short-term economic growth and hinders social unrest, without a glut in the market and lower property prices, she says.

S&P China Property sales in 2022 are estimated to be down by a third. The real estate market accounts for about a quarter of China as GDP the country's economy is also struggling due to Xi's tough stance on the one that Covid caused the restrictions.

Shiana Yue, an expert on China's economy at Capital Economics, says the country's economic outlook has deteriorated in 2022 as the property market struggles.

The worsening situation with Covid increases the risks of suspensions and will continue to have a negative impact on consumer confidence. The problems in the housing market seem far from resolved. And while political support has been ramped up, we doubt it will give a significant boost to the economy, "she said.^[3]

2021

Chinese developers account for about half of global problem debt

Real estate problems in, China which surfaced in September 2021, have led to tens of billions of bonds being sold at bargain prices. Stress affected dozens of issuers associated with the Chinese real estate market, as a result of which problem debts worth $64 billion were accumulated.

China banned from building skyscrapers above 0.5 km

In early July 2021, the State Committee for Development and Reform of the PRC banned the construction of skyscrapers over 500 meters high. The authorities also limited the construction of towers with a height of more than 250 meters, as they fear for the quality of the erected objects due to weak supervision of the work. Read more here.

2018: Fight against illegal rental of state housing with smart locks that recognize owners by face

At the end of December 2018, it became known that smart locks with facial recognition technology are being introduced at an accelerated pace in Beijing's public housing. With their help, local authorities are strengthening measures against illegal retaking of public housing provided to low-income families at preferential prices. Read more here.

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