Fixing China’s property sector could take years

Fixing China’s property sector could take years — if not a decade

Fixing the Chinese property sector is an endeavor that could take up to a decade’s work, said Grow Investment’s chief economist Hao Hong.China’s property market has been embattled by faltering consumer confidence in real estate companies as property giants Evergrande and Country Garden remain mired in debt woes.

China’s urbanization drive may be drawing to a close — and that could further hurt the already ailing property sector, according to China economist Hao Hong.

“Fixing the property sector may be a multi-year or even a decade’s work in front of us. Reason being, we built way too many housing for Chinese people,” the chief economist of Grow Investment.

“Also the Chinese urbanization process, which has been progressing very fast in the past 10 years, is coming to a halt,” Hong added.

China’s property market has been embattled by faltering consumer confidence, as property giants Evergrande and Country Garden are mired in debt problems.

Evergrande, which defaulted in 2021 following a liquidity crisis, announced Friday it would delay a debt restructuring meeting which was due Monday. Country Garden is also teetering on default.

Hong noted that 18 trillion yuan ($2.46 trillion) worth of Chinese property were sold two years ago. He said managing 10 trillion this year, or five to six trillion yuan worth of sales further down the road, would be considered “lucky.”

China’s August new home prices dipped 0.3% month-on-month, extending the real estate slump. The figure also marked a 0.1% drop compared to a year ago.

The view from the observation deck at Shanghai Tower in Shanghai, China, on Sunday, April 9, 2023. China's economic recovery is picking up steam after Covid restrictions were abruptly dropped and the property market stabilizes, although the rebound is still fairly patchy and policymakers have no intention yet of scaling back monetary support. Photographer: Qilai Shen/Bloomberg via Getty Images

Shanghai’s city skyline as seen from observation deck at Shanghai Tower in China.

Qilai Shen | Bloomberg | Getty Images

Just over the weekend, a former Chinese official warned that China’s population of 1.4 billion would not be able to fill the unoccupied apartments across the country.

“There is now an oversupply of real estate … 1.4 billion people may not be able to live in them,” said He Keng, a former deputy head of China’s statistics bureau. He was speaking at a conference, according to local media reports.

China’s post-Covid economic recovery story has been disappointing, although August retail sales and industrial production data picked up pace with better-than-expected growth.

Source: CNBC