House prices are falling rapidly in China

House prices are falling rapidly in China

House prices are falling rapidly in China

House prices in China recorded the fastest drop in the last year in September. This drop has raised doubts about whether the measures Beijing has taken to support the real estate market will be enough to revive the sector.

According to figures released today by China’s National Bureau of Statistics, new home prices in 70 cities, excluding state-subsidized housing, fell 0.3 percent last month compared with August. This was the steepest monthly drop since October 2022.

THE STATE MEASURES DID NOT WORK

According to Bloomberg, the price declines occurred despite measures such as lowering mortgage rates and down payment requirements to stimulate the market in major cities.

Chinese property developers continued to grapple with the crisis, which left them out of money, delaying the completion of apartments and depriving the economy of a key boost. Home sales and real estate investments also affected economic output last quarter.

THE SECTOR IS AT A TURN POINT

The housing crisis took another terrifying turn this week when Country Garden Holdings, once the country’s largest developer, signaled for the first time that it might default on a dollar bond.

Fear that contractors will not be able to finish the homes has deterred Chinese customers from purchasing homes. Furthermore, real estate in China has long been a means of wealth accumulation and investment. Therefore, falling prices are another deterrent for home buyers.

HOUSING PRODUCTION IS IN THE WORST PERIOD IN HISTORY

While shares of Chinese real estate developers fell to their lowest levels in the last 14 years, the production of China’s real estate sector also contracted 2.7 percent in the third quarter of 2023. Thus, the production of the sector it has contracted in eight of the last nine quarters. It was the longest decline on record in China since the establishment of a private property market in the late 1990s.

According to Goldman Sachs analysts, the decline in the real estate sector and the decline in traditional automobile production will reduce economic growth by 0.5 percentage points per year between 2023 and 2027 and will have a negative impact on employment.

Source: Sozcu

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