cross-posted from: https://lemmy.sdf.org/post/47575737
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The turning point [for China's property market] came during the country's first wave of COVID-19 lockdowns when President Xi Jinping's government imposed sweeping new rules on how much debt property developers could take on. The result of the "three red lines" reforms was brutal. Real estate giants like Evergrande, Country Garden and dozens of smaller firms defaulted, with more than 70 developers either going bust or needing state-backed bailouts to survive.
More than five years later, the subsequent bust shows no sign of easing. According to Barclays, a British bank, more than $18 trillion (€15.38 trillion) in household wealth has evaporated as home values collapse. Meanwhile, construction activity — once a key driver of gross domestic product (GDP) — has slumped so badly that it now drags overall growth below Beijing’s targets.
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In a sign of just how sensitive the downturn has become, Chinese officials last month told private data providers to stop publishing home sales figures, cutting off one of the few independent windows into the current woes in the real estate market.
The move followed a 42% year-on-year drop in new home sales by the top 100 builders in October, the largest monthly drop in 18 months, according to China Real Estate Information.
Anne Stevenson-Yang, founder and research director of the Taipei-based J Capital Research, thinks this move helps mask the true price decline.
"You likely have a market-wide drop of 50%, which could go down to 85% before it balances out," she told DW.
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Across China, the crash has left half‑finished projects, ghost cities and millions of households trapped in negative equity, sparking public anger and sporadic protests as buyers hope that Beijing will step in with stimulus measures to shore up demand.
"There's still a lot of excess supply — up to 3-5 years of unsold apartments and housing, mostly in the smaller cities," George Magnus, research associate at the UK's University of Oxford China Center, told DW. "It'll take a long time to clear, especially as the cohort of first-time buyers — 20-35 year olds — is now declining."
Having climbed to 1.41 billion, China’s population is now slipping backwards, marking the end of decades of growth.
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China's major economic growth driver evaporates
Real estate once accounted for up to a quarter of China's GDP, helping growth remain in double digits for more than a decade during the 2000s and early 2010s. The slowdown has since dragged economic growth to around 5% last year — still impressive, but down sharply from the boom years due to the knock-on effects on the rest of the country.
“[Chinese] steel and cement prices and output are dropping, employment and [business] investment are weak — all of them collateral damage [from the property crash]," Stevenson-Yang told DW.
China was the world’s largest consumer of iron ore, copper, steel, and cement, much of it tied to construction. Exporters Australia, Brazil and Chile are among the global players suffering from the falloff in Chinese demand. As homeowners feel the pinch, the slowdown weakens household consumption, reducing imports of foreign luxury brands and autos.
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Stevenson-Yang believes the Chinese property sector is on course for another "10 years of negative or flat growth," while analysts at S&P Global Ratings believe the downturn could persist well into the late 2020s. Some forecasts hint at recovery next year or in 2027.
That’s a hard pill for ordinary Chinese families to swallow. Many of them poured their savings into apartments that have lost value, leaving them stuck with mortgages they can’t escape and homes they can’t sell. Worse still, property values may remain far below the dizzying highs of 2020 for the foreseeable future.
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