The housing market in China has recorded a sharp drop-off in home sales throughout July as underlying economic troubles make themselves more apparent.
Sales dropped 39.7% in July from the same period last year, marking a roughly $77.6 billion – or 523.14 billion yuan – decline. Just from June to July saw a drop of 28.6%, which ended a two-month rally.
Apartment sales had increased in May and June over the previous months, but July largely blunted those gains, according to The Wall Street Journal.
“China’s economy has been slowing for quite some time,” Craig Singleton, a fellow at the nonpartisan Foundation for Defense of Democracies, previously told G3 Box News Digital. “What we’re witnessing now is a rapid economic slowdown.”
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Singleton argues that while COVID-19 has played a part in the initial troubles, China’s recovery slowdown has resulted from “deeper structural, systemic problems.”
“One of them happens to be … China’s hyper leveraged property market by some conservative estimates,” he explained. “China’s property sector makes up 30% of Chinese GDP, so even small deviations in that market can have outsized impact on China’s broader global domestic product and its broader growth.”
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The Chinese real estate market saw a sales boom driven by debt-funded building projects that sold homes before they were built. The lack of completed projects led to protests from angry would-be homebuyers who refused to pay their mortgages.
Hundreds of buyers from roughly 320 projects across the country as of July 29 have refused to pay their mortgages. Those prospective buyers have turned instead to buy second-hand homes or newly-built state-owned homes, which can come at a cheaper cost.
Even cutting interest rates and down payments or outright offering cash subsidies haven’t helped prompt enough activity to prop up the sagging housing market. Local authorities have considered offering full-on relief funds for cash-strapped developers.
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“The sector won’t stabilize if developers’ liquidity crunch is not relieved,” said Song Hongwei, a research director of Tongce Research Institute.