China property crisis: why the housing market is collapsing – and the risks to the wider economy

China has been trimming interest rates recently – in contrast to other major economies – as it tries to stem the economic effects of its zero-COVID policy and address a growing property crisis. The country’s traditionally strong housing market has been affected by a funding crisis that has seen development paused and led to buyers refusing to pay their mortgages.

The trigger for the buyers’ strikes is a widespread belief among these protesters that the funds homeowners have paid in advance to the builders of these property developments have been misused. Indeed, a commonly observed pattern in China’s property development industry is for developers to purchase lands, pledge them to banks to get loans, start projects, begin the presale process with buyers and then use these funds to purchase lands for other projects.

The weak market has substantially reduced the funding available to developers, as figure 2 below shows. This is the root cause of the current situation in which developers have paused building, causing homeowners to strike by refusing to pay their mortgages. This is not alarmism: Chinese developers generally borrow a lot of money to fund ongoing construction. While the industry average debt-to-asset ratio is around 65%, some of the leading companies are even more indebted .

Malaysia Malaysia Latest News, Malaysia Malaysia Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Another week, another construction company collapse — so do you have any hope of building a new home?As hundreds of property owners wait to see what will become of their unfinished houses following the collapse of Oracle Homes, we asked the experts what the future may hold. If we weren’t pumping land prices so hard, more of us could afford to build. Lol, oh ABC, you think we can afford do actually buy a home, let alone build one? No, the entire property market is going to collapse just a matter of timing now.
Source: abcnews - 🏆 5. / 83 Read more »

The worst is yet to come for the housing marketPredictions that the housing downturn was about to end are premature because the worst impact of higher interest rates is a way off, some experts warn.
Source: FinancialReview - 🏆 2. / 90 Read more »