Real estate, China’s economic growth pillar, continues to show signs of crisis with no end in sight. It manifests in the following four factors.

First: When domestic market confidence decreases, China’s rich flock to Singapore to hunt for luxury houses

Reuters reported that within the first eight months of 2022, Chinese buyers led the list of purchasers of luxury condos costing over $3.5 million. Singapore sold 425 luxury units, among them 85 luxury condos were traded for Chinese rich, accounting for about one-fifth.

In June, a Chinese tycoon bought 20 luxury apartments in central Singapore worth a total of $60.29 million. 

There was another wealthy Chinese man who paid $42.6 million to buy four apartments in Singapore.

According to Times Finance, Chinese purchasers including those with permanent resident status purchased 366 private residential units in the second quarter of this year. This is a 106% rise compared to the first quarter.

Luo Jia , a middle-level manager of an unnamed company, bought a three-bedroom house this March for 100,000 yuan, or $13,700, per square meter.

Second, as confidence falls, sales also fall accordingly.

The sales of new homes by China’s top 100 builders have gone down for 14 months in a row. China Real Estate Information Corp., an industry data provider, says that they fell 47% in the first eight months of this year.

According to the Wall Street Journal, this year, the request for mortgages in China dropped sharply. From January to July, Chinese households borrowed the equivalent of $249 billion in medium- and long-term loans, which is 55% less than the same time last year. This information comes from official data on Wind. Most of these loans are used to pay for homes.

Mainland China Business News  reported on September 6 that the “personal housing loans” of the six largest state-owned banks added up to 26.9 trillion yuan in the first half of this year, which is only a small increase from the beginning of the period. During the same time last year, the increase was as much as 1.3 trillion yuan or about $179 billion . This year’s rise is only about 1/3 of what it was during the same time last year. This is a new low.

The biggest reduction to mention CIFI Holdings. According to the data of the China Index Research Institute, Its sales of 113 billion yuan or $15.5 billion in the first ten months, a year-on-year decrease of 45.8%. Since the beginning of this year, CIFI Holdings has fallen by 91%.

China’s property market entered its traditional peak sales season in September and October, also known as the “Golden Nine and Silver Ten.” 

But China’s new house sales by floor area dropped 37.7% from a year ago during the National Day. Despite the fact that in August, Chinese banks cut the benchmark lending rate for mortgages to make it cheaper for people to get loans to buy homes. This is the second time this year the five-year loan prime rate was cut.

On Oct 10 Reuters cited data from the China Index Academy, showing that new house sales by floor area in China’s four major cities plummeted compared with last year’s holiday season.

Property sales in Beijing fell 64%, Shenzhen was down 49%, while in Shanghai, sales dropped 47%. 

Hangzhou faced the sharpest decline at 80%, greater than all the cities tracked in the index.

Old house prices are also worse. As of September, prices of second-hand houses in Baicheng, Jilin province, have fallen for the fifth consecutive month.

Second-hand house prices in hundreds of cities in China have been steadily falling month by month since May, and the downward momentum has gradually widened.

Third, house prices continued to fall and house sales also fell, causing huge losses.

Da Ji Yuan, citing data from China Index Academy, reported that the average sales of the top 100 Chinese housing firms from January to September plummeted 45.1% from a year ago.

The sales volume of the companies last month reached $80.4 billion (570.96 billion yuan), an increase of 10% from August and a decline of 25.4% over the same period the previous year. 

Accordingly, profit of firms was also down.

More than 70% of Chinese real estate firms saw a decrease in net profit compared to the same period last year.

Specifically, out of 169 listed real estate companies, 129 companies saw a decrease in net profit. There are 55 losing companies, with a total loss of more than 59.5 billion yuan (nearly $9 billion).

R&F Real Estate was the biggest loser, with a loss of 6.92 billion yuan ($1 billion). Jianye Real Estate followed closely, with 5.6 billion yuan. 15 real estate companies lost more than 1 billion yuan each. Meanwhile, 8 others lost 2 billion yuan.

Fourth, a disturbing new trend has emerged in China, the resignation of real estate company founders.

Comments on the resignation of the founders, Kakei Lam, a fund investment officer at Metaverse Securities, argued that “The golden age of Chinese property is gone, and they probably don’t see too much they can do to help.”

But the market seems to have a different view. Their departure has worried investors about a darker future in the debt-ridden real estate sector.

Kanzhongguo, citing Caixin chair Xie Jinhe, noted that Soho China founders Pan Shiyi and his wife were the first to flee to the United States in September. After the two left, the company’s stock prices immediately dropped from an already low $0.61 to $0.14.

Then came Yang Guoqiang  of Country Garden with his daughter Yang Huiyan. The Chinese tycoon decided to run away while his firm’s debt exceeded $255 billion.

In addition, billionaire founders Xu Rongmao of the Shimao Group and Li Silian of R&F Properties have also departed.  R&F’s shares have recently plunged from $3.04 to $0.14 after Li left.

The latest,Longfor Group Holdings’ Wu Yajun resigned from the executive director and the chair position. Once China’s richest woman, Wu has lost two-thirds of her fortune this year and is no longer on Bloomberg’s 500 billionaires list.

Wu Yajun’s resignation sent Longfor’s stock price plummeting. Despite the fact that the Wu family spent nearly 30 million Hong Kong dollars (nearly 4 million USD) to buy shares of Longfor to strengthen investors’ confidence in this company.
Bloomberg said that Wu’s failure in buying Longfor’s shares to maintain investor confidence has shown that intervention by famous individuals cannot be relied on to prevent the crisis on a national scale.

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