Copyright © BusinessAMBE 2023

Paying and borrowing for housing is an essential step in many people's lives, including in China. Except that 20 million paid housing units in the Celestial Kingdom have never been completed. A bomb about to explode.

A bubble that continues to grow... The Chinese real estate market encounters crises and new scandals time and again. Developers are reeling from their massive debt, the courts are lurking, and buyers have lost the confidence needed to restore demand. Market practices in the country make individuals vulnerable.

Homes are being sold but are uninhabitable

The figure should be interpreted with caution, but is causing a stir. In an earlier statement, the former vice president of the National Bureau of Statistics hinted that there were probably more empty homes than residents in the country. Now a recent study by Japanese financial holding company Nomura confirms this in a painfully concrete way.

  • There are reportedly 20 million homes under construction in China that have never been completed. This is equivalent to 20 times the size of the real estate portfolio of the largest private player in the sector, Country Garden. It is currently experiencing financial difficulties, with a default of 470 million Hong Kong dollars (56.7 million euros) last month.
  • But there is an important difference: these are not unsold or unsellable properties. On the contrary, apartments in China are usually sold before they are completed. So these 20 million homes differ from the 7.2 million unsold homes, according to Reuters' calculations last September. In their current state, they are uninhabitable.

A time bomb about to explode

It has become an important issue for the government: not only must it support its threatened real estate sector to prevent collapse, but it must also ensure that Chinese who have paid to acquire property actually receive something. This is to prevent rising anger, which is the regime's primary concern.

52% of homes sold are never completed

  • Last year, many buyers refused to pay their mortgages for property purchases that had still not been delivered, writes the American Economic Medium.
  • The situation is worsening: "If we assume 20% growth in the volume of newly completed structures for the current year, developers will manage to deliver barely 48% of the homes pre-sold between 2015 and 2020," the Japanese analysts said.
  • Beijing will likely have to step in, as local governments are unlikely to be able to fund the latest work. This is because of lost revenue due to the downturn of real estate giants.

© The Content Exchange, source News