China’s property market troubles worsened in August as new-home sales from the top 100 real estate firms dropped 22% year-over-year.
This decline exceeded July’s 19.7% drop, highlighting the sector’s ongoing challenges, according to data from China Real Estate Information Corp.
The value of transactions fell by 2.43% from July, marking a significant downturn after a staggering 36% decline in the previous month.
The accelerated slump signals the fading impact of the May rescue package, raising concerns about the sector’s future.
In response to the market’s ongoing struggles, at least ten city governments have loosened or scrapped new-home price controls, stepping back to let market forces drive prices lower.
This move is aimed at encouraging more real estate companies to slash prices and stimulate sales.
Bloomberg Economics notes that the beleaguered property sector continues to weigh heavily on China’s broader economy, which may need further stimulus to hit the government’s 5% growth target this year.
Over the past two years, the crisis has rippled through the job market, dampened consumption, and eroded household wealth.
To address these challenges, China is considering a new funding strategy that would allow local governments to purchase unsold homes, using special bonds for financing.
As of July, China had a staggering 382 million square meters of unsold new homes—equivalent to the size of Detroit—according to official data referenced by Bloomberg.
Struggling developers, many teetering on the brink of default for over a year, are banking on a revival in sales to convince debt holders and stave off liquidation.
In a troubling development, Dexin China Holdings Co. was recently ordered to liquidate by a Hong Kong court, while Country Garden Holdings Co. is reportedly considering yet another extension on payments for some of its yuan bonds.
To combat the rising tide of unsold inventory, some developers have resorted to unconventional promotional tactics, hoping to turn the tide in a market still searching for stability.
The challenges faced by these developers underscore the broader impacts on the business landscape, as the property sector’s struggles reverberate across the economy, affecting jobs, consumption, and overall economic growth.
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