China’s Real Estate Market Faces Big Challenges as Home Sales Drop
The Chinese real estate market, once a major part of the economy, is now facing serious problems. New-home sales have reached their lowest point in 18 years because many people are afraid to buy homes. This is because some developers have run out of money and stopped building homes, according to a report.
In China, homes are often sold before they are finished, which helps developers get their money back faster. But these presales have dropped by about 30%. From January to July this year, new-home sales also fell by 21%, according to the National Bureau of Statistics.
The housing market problems have caused a long economic crisis for real estate developers. Many have stopped building homes that were already sold, leaving buyers waiting. This has led to protests and mortgage strikes.
The Chinese Communist Party is worried that people will get very upset about these delays. In a meeting in July, the party suggested changes to the presales system and encouraged selling completed homes. Local governments are now giving developers tax breaks and more credit from banks, but only if they sell finished homes.
If developers sell more completed homes, it will take longer for them to get their money back. This could also make homes 20% to 30% more expensive for buyers. Even if home sales get better, prices are still going down, and it’s unclear if developers can get the money they need.
Yusuke Miura, a senior researcher, said that slower money turnover will make it hard for real estate companies to be as aggressive as before. New-home sales are still dropping, and prices have fallen in 66 out of 70 major cities in July. Prices have been going down for 14 months in a row, with an average drop of 0.6% across these cities. Developers are finding it hard to get funds for their projects.
Doubts Revealed
Real Estate Market -: The real estate market is where people buy, sell, and build homes and buildings. It’s like a big marketplace for houses and apartments.
Home Sales Drop -: This means fewer people are buying homes than before. It’s like when fewer people buy toys from a toy store.
Developers -: Developers are companies or people who build new homes and buildings. They are like the builders who make new houses.
Financial Issues -: Financial issues mean having problems with money. It’s like when you don’t have enough pocket money to buy something you want.
Presales -: Presales are when homes are sold before they are built. It’s like booking a toy before it comes to the store.
Chinese Communist Party -: The Chinese Communist Party is the main political party in China. They make important decisions for the country, like the government in India.
Reforms -: Reforms are changes made to improve something. It’s like fixing rules to make a game more fun and fair.
Investment Recovery -: Investment recovery means getting back the money that was put into something. It’s like saving up your pocket money again after spending it.
Major Cities -: Major cities are the big and important cities in a country, like Mumbai or Delhi in India.
