More than 50% of second-tier cities in mainland China saw a decline in the price of both new and old houses. That’s despite local authorities issuing limit orders to curb the downward trend. 

According to China’s National Bureau of Statistics, the prices of both new and used homes in 17 of the 31 second-tier cities fell from the previous year. As a general trend, housing prices are going down.

Among this trend, housing prices in certain places decreased drastically, such as in major cities like Harbin, Wuhan, Lanzhou, Xining, Taiyuan, Shenyang, Shijiazhuang, and Tianjin. 

Take the city of Harbin as an example. Two COVID outbreaks occurred in this city in September. 

According to China Index Research Institute, the number of customer visits and sales for most housing projects has decreased. So is the average transaction price of the property market. The housing market has a lot of problems, like no sales in the residential land market, population outflow, and slow industrial transformation.

According to Jiemian News’ report on November 7, citing data from the China Real Estate Association, in more than half of the 313 cities, home prices in September dropped compared to the same time last year.

In addition, real estate companies across China also did not fare well. According to China Index Academy, the average sales of the top 100 Chinese real estate companies dropped more than 45% from January to September to $7.4 billion (54.08 billion yuan). Based on last year’s performance, big housing companies are still in a negative growth cycle. 

Wang He is a current affairs commentator based in the U.S. Talking to Chinese language media Da Ji Yuan recently, Wang said that China’s primary concern is not the low housing transaction volume but instead the collapse of housing prices. He explained that the mortgage loan would be a problem once the housing price fell. Bank bad debts will lead to an increasingly bad debt rate, eventually becoming a financial crisis. So, many places have issued orders to limit housing prices. Beijing would rather have a price without a market than allow home prices to go into free fall.

Wang He questioned how long Beijing could artificially and forcibly freeze house prices using price limit orders. He compared the situation to a flood, whereby the pressure will heap up as time goes on. He warns that if this policy continues, sooner or later, China’s real estate market will burst, hurting China’s economy.

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