Global Market Scan: Assessing the severe downturn in China’s real estate sector

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China’s real estate market is in a deep downturn, with housing prices nearly matching 2015 lows. At the end of April, the country had completed and unsold properties covering 391 million square metres, equivalent in size to 6.6 Manhattans.recently surveyed 14 cities, finding the number of homes offered for purchase was 20 times greater than earlier sales volumes.

The financial difficulties faced by real estate developers resulted in the recent bankruptcies of companies such as Sino-Ocean, Country Garden and Evergrande, which issued a large number of U.S. dollar bonds in Hong Kong, along with RMB bonds onshore. The defaults also uncovered serious debt issues with China’s municipal governments.

Since then, major easing measures for homeowners have been implemented in three of the country’s largest cities: Shanghai, Shenzhen, and Guangzhou. These initiatives have lowered down payment requirements and increased the availability of lower-cost mortgages. Similarly, a report from Fitch Ratings forecasts China’s yearly demand for new housing will fall by about 20 per cent between 2024 and 2040 to an average of 800 million square metres. This drop will be due to slowing urbanization, an aging population and a changing economic landscape. Consequently, the annual supply of new private dwellings, measured by gross floor area , may decrease to 600 million square metres.

 

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