China’s Housing Crisis Deepens: Real Estate Sales Plummet Amid Economic Struggles

China’s real estate Market is facing a severe downturn, with new-home sales plummeting by 26.8% in August compared to last year, reaching 251 billion yuan ($35.4 billion). This decline is more significant than the previous month’s drop and reflects the fading effects of a recent rescue package. In response, at least 10 cities have adjusted pricing guidelines to boost Market demand, which could lead to further price cuts by real estate companies. The housing crisis is impacting China’s economy significantly, affecting jobs and household wealth. To address the surplus of 382 million square meters of unsold homes, China is exploring funding options for local governments to buy these properties, aiming to stabilize the Market as developers struggle with mounting debts.

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China’s Economy Faces Deepening Real Estate Crisis

China’s property Market is experiencing a serious downturn, as the residential slump worsened in August. New-home prices are expected to continue falling, complicating efforts to revitalize the economy. Recent data from the China Real Estate Information Corp shows that sales from the top 100 real estate companies plummeted by 26.8 percent year-on-year, reaching about 251 billion yuan (equivalent to $35.4 billion). This decline is sharper than the 19.7 percent drop recorded in July.

The situation reveals that the new rescue package introduced in May has had limited effect. In response to the downturn, at least 10 city governments have started to ease or completely remove price guidelines for new houses, allowing Market forces to take over. This strategy is likely to push more developers to reduce their prices in order to attract buyers.

The persistent troubles in the real estate sector are dragging down China’s overall economy, which needs a robust stimulus to achieve the government’s 5 percent growth target for the year. The crisis has had ripple effects across various sectors, influencing job opportunities, consumer spending, and household wealth.

To tackle the growing inventory of unsold homes—amounting to around 382 million square meters, which is roughly the size of Detroit—China is exploring new funding mechanisms. Reports suggest that local governments might be allowed to use special bonds to purchase these unsold properties, potentially revitalizing the Market.

Cash-strapped developers are hoping for a rebound in sales to reassure their debt holders amid ongoing financial strains. Notably, Dexin China Holdings Co. was recently ordered into liquidation by a Hong Kong court, highlighting the industry’s struggles. In another development, Country Garden Holdings Co. is reportedly contemplating extending payments on some of its yuan bonds, underscoring the increasing financial pressures in the sector.

As China navigates this challenging period, further measures will likely be necessary to stabilize the real estate Market and support broader economic recovery.

Tags: China economy, real estate crisis, new-home sales, property Market, economic growth, housing prices, local governments, unsold homes, stimulus measures

What is happening with home sales in China?
Home sales in China are dropping even though the government is trying to help the situation.

Why is the government trying to help home sales?
The government wants to boost the economy and support people who want to buy homes.

What measures has the government taken?
The government has introduced policies like lowering interest rates and offering financial support to developers.

How are buyers reacting to the current situation?
Many buyers are cautious and unsure about purchasing homes due to falling prices and economic concerns.

Will the situation improve soon?
It’s hard to say. Experts have different opinions, and it may take time for the Market to recover.