China’s declining housing market was a topic Gao Lixin and her family avoided during this Chinese New Year.
Discussing it would “spoil the festive atmosphere and cause anxiety,” Gao recently told The Epoch Times. She uses an alias out of fear of reprisal from the Chinese regime.
Her sister has an apartment of about 1,500 square feet in a small city in Hebei Province, 18 miles from Beijing. The unit cost 2.6 million yuan ($350,000) at the time of purchase in 2017. With a 20 percent down payment, the monthly payment on her 30-year mortgage is about 4,800 yuan ($650).
Since then, the property’s value has plummeted by two-thirds. Last year, the sister attempted to sell the apartment for a third of the original price of $110,000, but to no avail.
The unit is now rented out for $200 per month. After subtracting utility and property fees, the net income from the rent was just one-sixth of the mortgage she owes.
Gao’s sister’s case is not isolated.
The official story is that China’s property market will recover this year. However, experts believe the sector has yet to reach rock bottom due to structural problems and a lack of consumer demand. Although the authorities rolled out a series of stimulus packages last year, these measures have failed to address the root cause.
According to Zhai, the Chinese Communist Party (CCP) has exhausted all means of keeping the real estate industry afloat, from governmental policies at all levels to support within the public and private business sectors.
Last year, the authorities approved loans of more than 5 trillion yuan (about $686 billion) to help real estate companies improve their ability to repay or reduce debts. A special bond quota for local governments in 2025, estimated to reach 4.5 trillion yuan ($615 billion), can be used to fund land reserves and buy vacant housing units.
Local authorities have also increased their efforts to promote home purchases. Last year, local governments in various provinces and cities introduced 1,132 policies to support the initiative, a 28 percent increase from the previous year. These policies include cutting mortgage rates, reducing down payment requirements, and offering tax incentives to lower the cost of housing transactions.
In May 2024, the Chinese central bank announced a 300 billion yuan ($41 billion) affordable housing initiative aimed at securing home refinancing loans and assisting local state-owned enterprises in purchasing existing residential properties.
However, according to Zhai, the CCP’s stimulus measures fail to effectively address China’s property crisis.
“When all options have been explored, and without a solution, a meltdown is inevitable, resulting in a major crisis in the real estate sector,” he said.
Last month, the average price per square meter of existing homes fell by 7 percent year-on-year in China’s top 100 cities, the China Index Academy said in a monthly report.
Structural Problems
China expert Shi Shan believes that one of the root causes of the CCP’s failure to address China’s real estate crisis is the collusion and corruption among the financial system, local governments, and developers.As property values fell, banks began to see non-performing loans. The CCP may issue stress-relief funds to address the real estate debt crisis, but these funds are mostly “trapped” within the financial system, Shi said.
He said that local banks collaborate with local governments and state-owned real estate enterprises to issue new loans to repay old ones, thus recycling bad debts through such operations.
The CCP authorities also intervened to prevent more real estate companies from going bankrupt, even though many are saddled with bad debt, according to U.S.-based economist Frank Xie.
Chinese state-run media reported that in January, at least 55 listed real estate companies faced defaults on offshore debt, with more than half receiving liquidation petitions. However, most of these petitions have been withdrawn or postponed, including Country Garden, China’s biggest developer by sales, whose total liabilities surpassed 1.1 trillion yuan ($150 billion) as of June 2024.
On Jan. 21, Country Garden resumed trading on the Hong Kong Stock Exchange after announcing that its offshore debt restructuring plan was on track and could reduce debt leverage by as much as $11.6 billion.
But Country Garden’s sales in January continue to decline, with contracted sales falling by 59 percent year-on-year to 2.26 billion yuan ($309 million), a further drop from the 51 percent decline in December last year.
“Beijing is exerting pressure on the courts or other financial law enforcement agencies to hinder the approval of these liquidation applications and bankruptcy proceedings,” Xie, a professor in business and marketing at the University of South Carolina–Aiken, told The Epoch Times.
He said that many of these companies are no longer viable and are on the brink of bankruptcy, and creditors view their money as tied up to debt-laden developers. Thus, he said, the CCP’s intervention has only contained the crisis instead of truly resolving it.
Furthermore, Chinese property developers will face pressure from increased debt maturities in 2025. Capital market debt maturities of Chinese property developers could reach 525.7 billion yuan ($72.5 billion) in 2025, 8.9 percent up from 2024, according to estimates by China Real Estate Information Corp.
Xie anticipates that the property market will face more challenges in 2025, warning that “China’s real estate industry has not yet reached rock bottom, but the moment is approaching.”
