Despite the ruling Chinese Communist Party’s (CCP’s) recent bailouts, the decline in China’s real estate market persists, marked by a continuous drop in home prices in first-tier cities, according to the latest data.
Meanwhile, by December 2023, secondhand property prices in China’s four affluent first-tier cities—Beijing, Shanghai, Guangzhou, and Shenzhen—plunged between 11 percent and 14 percent year-on-year, according to Hong Kong-based Centaline Property.
In Beijing and Shanghai, properties surrounding good school districts are among the most expensive listings, but the situation has changed. Several years ago, a 20- or 30-square-meter (about 215–323 square feet) old house in some top school districts used to fetch over 200,000 yuan (about $28,000) per square meter (about 10 square feet). But now, prices have plummeted, with some dropping by 100,000 yuan (about $14,000) per square meter, according to Chinese financial media Yicai’s report on Jan. 23.
A resident surnamed Dong told Yicai that he spent nearly 4 million yuan (about $560,000) to buy a small one-bedroom apartment in the school district in 2020. Though it is less than 40 square meters (about 430 square feet), he believed the location made this property a good investment.
He had anticipated making a profit by renting out his apartment over the next few years. This would enable him to pay for his daughter’s tuition at the neighborhood’s best school.
However, Mr. Dong noted that the property price began to decline in 2022 and has continued to decrease monthly.
Moreover, Mr. Dong found that, by 2023, the amount he paid for this one-bedroom flat had been sufficient to purchase a two-bedroom apartment in the same neighborhood.
Surge in Unsold Foreclosure Homes
Foreclosures are generally viewed as a chance to acquire a bargain or make a low-cost investment. Still, foreclosure listings skyrocketed last year as more Chinese people became insolvent in mortgage repayments.Attributing to the sluggish Chinese economy, foreclosure sales still dived even with nearly half the bids.
According to a report by China Index Research Institute, as of December, 796,000 units of various properties were put up for auction in the Chinese foreclosure market, an increase of 214,000 units or 36.7 percent over the previous year. The total number of properties for auction hit a new high.
‘Buy a Flat and Get Free Gold’
Real estate and related industries once accounted for more than 25 percent of China’s GDP, and the decline in the sector has dragged down the world’s second-largest economy.Property managers in many cities and provinces used catchy slogans—such as “buy one get one free” or “buy a flat and get free gold”—in their advertisements to attract homebuyers.
Last September, a real estate company in Tianjin was fined 30,000 yuan (about $4,200) by the regulators for allegedly deceptive advertisements such as “buy a flat and get a free wife.” This phrase is ambiguous, as it could also mean “buy a flat to present wife as a gift.”
However, such marketing tactics had little effect on bolstering home sales.
In an attempt to boost the real estate market, the CCP has rolled out some incentive measures. On Jan. 25, Xiao Yuanqi, deputy director of the State Administration of Financial Supervision, claimed at a press conference that “the vast majority” of the 350 billion yuan (about $49.3 billion) of special loans had been invested to guarantee the completion of unfinished apartment buildings.
However, the 350 billion yuan cannot cover one-tenth of what is needed, as there are about 20 million unfinished buildings in China, which would take about 3.2 trillion yuan (about $440 billion) to complete the construction, according to a report by Nomura Securities last November,
Li Hengqing, director of the Washington Institute for Information and Strategy, told the Chinese language edition of The Epoch Times on Jan. 27 that “this amount of money is like a drop in the bucket and can neither resist the downward spiral of the Chinese economy and the real estate industry nor can it really boost confidence [of investors].”
Citing examples to support his perspective, Mr. Li outlined that real estate giant Evergrande alone has a total debt of more than 2.4 trillion yuan (about $338 billion). In addition, China’s local government debt is so high that Goldman Sachs estimated in August that it exceeded 94 trillion yuan (about $13 trillion).
Mr. Li believes the CCP’s intervention in the property sector and economy has failed, as “none of the CCP’s policy measures are willing or courageous enough to touch the core of the problem.”
For Beijing to effectively solve China’s economic problems, he said, it involves “relying totally on the market to allocate factors like production and operation while abandoning one-person or one-party dictatorship to follow the rule of law.”
“Both are indispensable.”
