The worst period for used homes in China has arrived, as all the statistics show. The amount of ghost properties (abandoned, deserted, and uninhabited) in China’s real estate market is large enough to cover the entire country of Germany. Real estate developers are unable to borrow because their debt bombs pose a financial threat to China. In its busiest parts, the secondary housing market is also experiencing its darkest hour in history.
House prices plummeted
According to Secretchina, the used-home transaction situation in Hangzhou was challenging in July, and it got significantly worse in August. Used-home sales decreased 19% month over month and 54% year over year in July, ranking second-lowest this year.
Until May, the market price in Chengdu has climbed, while the reference price of most used houses has decreased from 70% to 80%.
According to the most recent data from China’s National Bureau of Statistics, the sales price index of secondhand residential transactions in Shenzhen was 99.6, down 0.4 percentage points from the previous year, falling for three consecutive months.
A property complex in Shenzhen’s top school area sold for $777,000, making headlines across the globe.
The city of Xi’an has published a pricing guide for historic properties, and prices are decreasing. Similarly, the scenario in Xi’an’s real estate market is similar to Chengdu and Shenzhen.
The prospects for used house transactions are gloomy
Used commercial housing transactions in Shenzhen in August totaled 233,000 square meters, down 77% year on year; among them, used commercial housing transactions totaled 195,400 square meters, down 80% year on year, according to data from the Shenzhen Bureau of Housing and Urban-Rural Development.
The amount of secondhand housing transactions in Shenzhen has declined for the fifth straight month, with only 2,043 units exchanged, compared to 11,322 units in the same period last year, a decrease of 82%.
In reality, the number of secondhand house purchases in Shenzhen has slowly dropped since January’s peak, with the July figure down 64% from January. These numbers are closely related to the official guide price policy for used housing in Shenzhen issued in February.
A large number of houses for sale
According to used housing inventory, Suzhou, Lian Jia has more than 100,000 units, and inventory pressure is significant. From March to June, the weekly transaction volume averages around 1,000 units. Less than 1,000 units sold in the first week of July, a decrease from the previous month.
The property market in various school districts in Beijing’s capital, as well as in Shenzhen, has begun to deteriorate.
In cities like Meizhou, Lianjiang, Luoyang, and Fangchenggang, Harbin, Shenyang, Hohhot, Changchun and Taiyuan, Zhengzhou, Kunming, and Tianjin, there are many new houses.
According to Secretchina, 101,477 used houses in Harbin are for sale, 155,250 used homes for sale in Shenyang, 80,863 old houses in Changchun, and 94,367 used houses for sale Qingdao.
Beijing authorities issued policies such as correcting the “school housing” hype, strictly checking the flow of illegal money into the real estate market, preventing fake divorces as a ploy for buying homes and tightening credit for used housing.
Consequently, unfinished real estate has appeared all over China, especially projects in the name of real estate investors with accumulated debt.
On Oct. 11, according to media reports in mainland China, Harbin, the capital of Heilongjiang province, issued a document saying that qualified people can get up to $15,500 in housing allowance to buy their first home. In addition, they have also relaxed the subsidy for used housing.
The Harbin Urban and Rural Development and Housing Bureau, the Natural Planning Bureau, the Finance Bureau, and nine other departments jointly issued the “Implementation Opinion on Promoting Stable and Healthy Development” of the real estate market,” to be implemented in October.
According to the document, buying a house is subsidized. A full-time doctoral grant of $15,500, a master’s budget of $7,800, a $4,700 allowance for undergraduates, and a stipend of $3,100 for university and technical college students will be paid once in cash for the first commercial housing purchase. In addition, non-Harbin residents will receive a 1,600 dollar subsidy on their first home.
Pressure on the economy
The current conflicts in the property market in many cities across the country have turned from heating to overheating, according to Yan Yuejin, research director of the Shanghai E-House Research Institute’s Think Tank Center, and new risks have emerged, including financial risks for real estate companies. This policy reflects current pressures facing real estate companies, including liquidity pressure, tax and various spending pressures, and pressure to sell projects.
Many significant “high-revenue” real estate enterprises have shifted to tier 3 and tier 4 cities in recent years, according to Zhang Dawei, chief analyst at Centaline Property, who told the official media “China Securities Journal.”
Cash flow becomes constrained as credit becomes tighter. Because cash flow is more vital to these major real estate corporations than profits, they quickly remove funds through price decreases.
Furthermore, many analysts have downgraded their forecasts for China’s GDP growth this year due to the cooling of the real estate market and the expansion of the debt issue among property developers.