China’s Property Market Faces Challenges as Existing Home Prices Decline Sharply
According to analysts, China’s property market is in need of more government support as it faces various challenges. One of the main concerns is the sharp decline in existing home prices, which dropped in October by the largest percentage since 2014. This is not the only alarming trend, as outstanding property loans also fell for the first time in history.
While the government has made efforts to boost demand in the property market, it has failed to address the credit risk associated with developers. Experts warn that without a lender of last resort, a confidence crisis could easily occur. To mitigate these risks, measures have been introduced to improve access to financing and lower mortgage rates, reducing real estate developers’ reliance on debt.
Despite these initiatives, a major real estate company, Country Garden, recently defaulted on a U.S. dollar bond, suggesting that the measures may not be sufficient to stabilize the market. Moreover, there are still about 20 million unsold units that have been sold but are yet to be completed, adding to the concerns about oversupply.
The decline in home prices is not limited to smaller cities but also affects larger cities that usually experience sustained demand. In October, the average price for existing homes in major cities fell by 0.6%, indicating a broader market downturn. Analysts are predicting further declines as the property sector in China has not yet reached its lowest point.
The situation is causing some doubts about the impact of property stimulus policies that were implemented to boost the market. Markets may have been too optimistic, and it is becoming apparent that more comprehensive measures are needed to stabilize the property market and address the underlying challenges. Experts emphasize that increasing government support and addressing credit risks will be crucial for the market’s recovery.
As the property market remains a key driver of China’s economy, further developments in this sector will undoubtedly be closely monitored by analysts and investors alike.
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