The industry that has traditionally powered about a quarter of GDP has been in a downward spiral that policymakers have struggled to halt
All across China, from Beijing in the north, to Shenzhen in the south, millions of newly built homes stand empty and unwanted. There were nearly 391m sq metres of unsold residential property in China as of April, according to the National Bureau of Statistics. That is the equivalent of Manchester and Birmingham combined – and then some – sitting as vacant, unwanted property.
This glut of idle property has caused a headache for the government, shaken the world’s second largest economy and raised tensions over the purpose of housebuilding in a nation where property investment had been viewed as a safe bet.
Since the real estate sector was sent into a tailspin in 2020, caused by the pandemic and a sudden regulatory crackdown, the industry that has traditionally powered about one-quarter of GDP has been in a downward spiral that policymakers have struggled to halt.
The crux of the problem is that, with shaky faith in the economy and big property developers failing to deliver on paid-for apartments, potential homebuyers are keeping their money out of the market.
The people who invested knew that they were buying investment properties. The developers sold based on urbanization projections that did not follow through, the investors bought it up, and now the developers lose money and the investors who could afford to buy multiple homes lose money.
How terrible.
(As an aside, I think China’s reported urbanization rate is below reality because a lot of places that would be considered urban in Europe or North America are listed as rural in China). Under China’s definition, living a 15 minute drive from the center of a 200k-population city could be a “rural home.” I think that China’s urbanization numbers sent a false signal to developers that more development was needed, when in fact China was much further along the urbanization curve than the numbers indicated.
I don’t care that they are losing money, but the point is that it represents a threat to the stability of the government.
Developers losing money and consolidating property assets in the government? What, exactly, does this threaten?
GDP growth? It’s been a 1.5% headwind, and China is still blowing through GDP projections.
Climate change? The collapse of the construction industry has been a huge net positive for emissions reductions.
Housing prices? Those have been going down.
Savings? Only insomuch as if you intended to own multiple homes (that is, you’re the landlord class). Otherwise, you still own a single home that you need to live in.
Maybe you should ask the Chinese government why it’s a big deal, because they are the ones who have been propping it up and are attempting to do so again now. It’s all right in the article.
The Guardian doesn’t speak Chinese (or rather, they don’t understand it). Their reporting on China is consistently incompetent for that single fact. They refuse to dig through Chinese reports and Chinese data because they can’t understand it. The data is right there, plainly published for the world to see.
If they did, they would know that real estate’s contribution to GDP has fell off a cliff ever since Xi Jinping declared “housing is for living, not for speculation.” If they did, they would know that investment into real estate has pretty much entirely collapsed and shifted into manufacturing (clean energy, EVs, nuclear, robotics, etc.) If they did, they would know that their stories about “ghost cities” a few years back… Ended up being, well, cities. If they did, they would know that the prevailing thought on Chinese social media is that the government is allowing real estate developers to fall… And they’re definitely falling.
That’s what the data tells us. The bubble is actively deflating as we speak, and many estimate it to have been in excess of a 1% headwind on GDP growth in 2023… Citi just revised their projections of full-year GDP growth to 5%, and so have Goldman Sachs and BNP Paribas.
You didn’t demonstrate that they are wrong, you just said they are wrong. You didn’t even contradict the claims made in the article: that the government is clearly making efforts in an attempt to prop this up.
Well let’s start with, the prevailing opinion on social media here is that the Chinese government is attempting to prop up the real estate market, but it’s still “deflating.” Huh, interesting how “prevailing thought” on social media doesn’t really mean all that much.
And they are pointing to actions that contradict this “prevailing thought,” actions you haven’t actually challenged. And those actions that they point to shows that it’s falling despite their efforts, not that they are allowing it to happen. Again, you seem to just be ignoring facts you don’t like.
We can believe whatever reality we want when we don’t have to consider the facts. Just like good Trump supporters.
zeph is really trying to start a fight with absolutely everyone here.
I see it as more desperately trying to defend the Chinese government.
Local stimulus, which differs from Central government policy because contrary to popular belief the Chinese government is not a monolith. Different provinces want to get investment at the cost of other provinces, but this does not change the fact that in aggregate China’s bubble is actively being deflated by the actions of the central government. The prevailing trajectory of the market, and the actions which the central government have taken in this regard, are very clear. In modern terms, this is “picking up pennies in front of a freight train.”
sigh do you know what the minimum down payment for a home in central Beijing is? 50%.
Give me an action that indicates the central government is not trying to institute a controlled collapse (“soft landing”) of the real estate market. The numbers don’t lie, but apparently you do.
Let’s remember where this all starts from. The other poster said that if it tanks, people lose everything. You are now talking deflating the market softly, which indicates it is a bubble and that they are just trying to let the air out slowly. And ultimately, the top level point still stands: people are going to lose money, whether that be quickly or slowly.
Whether the the government is trying to “softly deflate it” or keep it growing (I suspect the latter, because again people losing all of their money in things the government has been encouraging and pumping up for decades is not a great look for them), they are propping it up, because letting the bubble burst would be a disaster.
It’s funny that you call me a liar, but then state that this has nothing to do with the central government, and then turn around and quote something from the article that is talking about the central bank of the country. lol You think see dishonesty in me because you know you are being dishonest.
How does lowering down payment requirements from 50% (!!!) prop up a market? It tweaks the demand curve a tiny bit, but like I said it’s towards engineering a soft landing. I told you that the central government is trying to engineer a soft landing. What evidence do you have that disproves this?
Investors (who could afford to buy multiple homes) lose money. How terrible.