Jannah Theme License is not validated, Go to the theme options page to validate the license, You need a single license for each domain name.
California

How to escape China’s property crisis

G.enter Ode to Jin Jiang is a little difficult. At a high-end real estate development in central Chengdu, prospective buyers can’t pass through the four-metre-high palatial gates without a reservation. It’s hard to even find out about this project in a major Southwestern city of 16 million people. The company is so confident in the demand that it will not advertise its apartments, but that confidence is not unwarranted. Chengdu has a unique, laid-back atmosphere, typified by public tea gardens, where patrons spend hours sipping hot beverages and cleaning their ears. Zhang Xiaojun, a sales agent for the development company, said the slow pace of life and mouth-watering local cuisine have attracted a large number of young Chinese visitors in recent years. Many of them buy homes.

Following the prolonged economic downturn, Chinese real estate market has taken hold, but Chengdu seems to be an outlier. By some metrics, including home prices and sales of new homes, it is in better shape than most of the country. At the national level, the central government’s response to the deepening property crisis, including the rate cut announced on June 13, was inadequate.China’s benchmark stock index has fallen 8% from its early May highs, but at the time it looked like China was still booming toward a full recovery. Recovery after COVID-19. Investors now fear more developers will run out of money and default on dollar-denominated debt in the process. Experts question how much local policies can boost growth. Chengdu is the perfect place to look for answers.

The local market has a slightly surreal feel to it. Investment bank Macquarie’s Larry Hu said new home sales in the April-June period were up 30% from the same period in 2019, the year before the COVID-19 pandemic hit. do. By contrast, sales fell 25% across China’s 30 largest cities. Meanwhile, housing prices in Chengdu rose 8% year-on-year in May, the highest among the big cities. It was the 17th consecutive month of month-on-month increases. Many cities in China are working to clear vast inventories of built but unsold apartments. In the southern city of Zhuhai, it will take more than 12 years to sell completed or under-construction homes if the current pace of sales continues. Chengdu will sell such apartments in just over three years.

What explains the success? Since 2016, authorities in each Chinese city have been able to devise their own measures to cool or warm the local property market. Most of the rules employed are restrictions on who can buy an apartment, how many they can buy, how much down payment is required, etc.In most big cities, only locals Kokou, or a person with a residence permit can buy housing. A high level of purchase regulation is still in place in Chengdu. But authorities have sought to attract families as a way to expand the city and boost housing demand. For example, residents with two or more children are permitted to purchase additional homes and may also purchase local housing. FukouOwners can purchase up to 3. even those who do not have Kokou I might buy two. Aging parents who move to Chengdu to live with their adult children after the beginning of this year may also buy apartments.

Other cities have experimented with similar policies, but with less success. Shenzhen, a cross-border tech hub with Hong Kong, has eased some restrictions. However, property prices are still down 1.8% year-on-year. One reason for this is the massive layoffs in the city’s technology sector. Another is that Chengdu’s policies are more effective because they are combined with reforms to attract educated workers, which contributes to boosting growth. Since 2017, local governments have offered housing subsidies and cash incentives to talented people who migrate to the city to work in the rapidly growing industrial base, said Sandra Chow of research firm CreditSights. Point out.

Chengdu authorities have also done a better job of dealing with the confidence crisis that spread across the country last year. Many apartments were never completed because the developer went bankrupt. Thousands of homebuyers responded by stopping mortgage payments. Even more people put off buying a new home. Ms. Zhou said Chengdu authorities made every effort to ensure the handover of the homes, pouring cash into the developers. Even defaulting developers managed to complete the house. The apartment space completed in his first two months of 2023 increased by about 40% compared to the same period last year. Perhaps this encouraged the hesitant buyer to take the plunge. Other regions might have wanted to follow suit, but lacked funding. Sichuan province, where Chengdu is located, will record the fastest growth in municipal land sales in the whole province in the first half of 2022, freeing up funds to keep construction workers in business.

Chengdu benefited from several other factors that are difficult, if not impossible, to replicate elsewhere, and perhaps even the city itself. Its population is expected to grow by more than 7 million from 2011 to 2021, making it one of the fastest growing urban areas in the world. These inflows are the biggest driver of housing demand, said Yang Yuezhen of research firm E-House China. Since then, however, urban migration has slowed. China just doesn’t have enough people to create a new population boom. Because Chengdu is located in the southwest, prices have not risen sharply during past housing booms. In addition, income continued to rise due to growth in manufacturing. The city is one of the few Tier 2 cities where prices have not risen sharply relative to local incomes, points out Louise Lu of another research firm, Oxford Economics.

Chengdu authorities have several options if things start to get ugly. Regulations have not yet eased significantly, allowing more people to buy homes. Guo Jie of the Association of Provincial Real Estate Enterprises, a trade group, said market players were waiting for such a development, saying it was running out of energy and engulfing even the best-prepared cities in the crisis. It is said that it is because it shows that it is growing. Policy makers in other parts of the country will also be watching closely.

https://www.economist.com/finance-and-economics/2023/06/28/how-to-escape-chinas-property-crisis How to escape China’s property crisis

Related Articles

Back to top button