2023-07-02 06:03:27
China’s May housing data showed which cities saw the biggest drop in used property prices and what economic consequences this might have for the country. The list, published on June 15, includes 70 large and medium-sized cities. The biggest drop was in Shanghai housing prices, where prices fell by 0.8% compared to the previous month. In second place is Beijing, the Chinese capital, where a 0.6% drop in prices was experienced. According to experts, the price drop in the two megacities is a sign of the bad economic situation. American economist Davy J. Wong explained that most Chinese investors are limited to real estate because investment opportunities are limited in the current power system. Wong also said that the Chinese see real estate as the greatest hedge once morest inflation and depreciation. In China, local governments and developers who determine the market price of new apartments have a strong monopoly on the real estate market. “On the other hand, the ‘used market’ has quite a bit of freedom of movement and thus reflects the true picture of the Chinese market,” he said. According to data from the Central Bank of China in 2019, apartments accounted for 74.2% of the tangible assets of urban households, according to a nationwide survey of 30,000 urban households. In comparison, real estate accounted for just 30% of total household wealth in the United States. Many people were forced to sell their homes The recent economic weakness forced the Chinese population to reduce their consumption. The country’s three-year zero-covid policy destroyed people’s confidence in the future. Many people are resorting to selling their properties in order to ease the financial tension that has developed. According to Wong, the decline in housing prices in Beijing and Shanghai suggests that supply is too large to keep up with transaction volume. Declining economy The American economist indicated that over the past more than 30 years, exports have greatly contributed to China’s economic growth. However, what he considers to be an even greater driving force are investments. “Real estate development accounted for half of Chinese investments”. Real estate investments are highly related to exports. If exports decline, “foreign capital will not flow into the economy, which is why the Chinese market will probably not recover any time soon. The outlook for the real estate market is definitely worrying,” he said. According to financial commentator Shih-tsung Huang, the real estate market situation in Beijing, Shanghai, Guangzhou and Shenzhen has the biggest impact on the Chinese market. Their decline would inevitably lead to the decline of the entire Chinese real estate industry. Moreover, a series of domino effects can spread to the banking system or household debts. Judging from past experience, Wong said that although changes in real estate market prices were always present, the Chinese market was never characterized by such a cycle of rise and fall. “It is possible that the Chinese real estate market is now facing significant downward pressure”. Real estate market weakness has been observed, for example, in the Japanese banking crisis of the 1990s, the 1998 financial turmoil in Taiwan, and the 2008 and 2009 US financial crises. “A 20-30 percent drop in the real estate market triggers a crisis in the entire economy, and even in the entire financial system,” he explained. “When [a kínai vezető] Xi Jinping ordered the country to “prepare for extreme scenarios”, I think he indicated that China is worried”, Wong concluded his analysis.
1688370070
#Chinese #housing #prices #falling #countrys #economy #trouble
