Cranes were common fixtures on the skylines of the country’s megacities and new blocks of skyscrapers appeared every week. Homebuyers crammed into showrooms to snap up high-rise apartment blocks off the plan, attracted by the certainty of soaring valuations. After securing their own homes, many became rich off investments in their second and third apartments.But there were warnings, even before the pandemic, that China’s property market was overvalued and developers were too reliant on debt.
The boom really kicked off in 1998 when China allowed households to buy and sell apartments. At the same time, mass migration from the countryside to big cities was taking place and demand was high. Local governments were suddenly making a fortune from land sales and encouraged property development. Buying a second property as an investment also became popular as prices continued to rise. China does not have a property tax. Buying off the plan, or pre-sales, also surged. Property prices rose more than six times in 15 years. At its peak, property contributed 25 per cent of China’s GDP in 2020.and the financing industry that funded the boom with loans to developers and homeowners.
Speculation was rampant as developers had easy access to debt and were predicting that demand would continue to surge. As the pandemic took hold, demand for new housing also started falling. Oversupply problems emerged and China’s “ghost cities” became a symbol of the glut of unwanted, and often unfinished departments, dominating entire neighbourhoods in some areas. For the first time in years, prices were falling in some cities.Bloomberg