Chinese real estate is worrying! Yet 10 sets of data clearly indicate that we are in a crisis. I found that the default amount has increased for 3 consecutive years.

Three years ago, Chinese policymakers did everything they could to stop the growth of the Chinese economyReal estate sectorAfter real estate prices rise from speculative purchases, the government hopes to eliminate the financial risks resulting from such a bubble.

But what the Chinese government got in return was… “real estate collapse” This is destroying household wealth in the world's second largest economy. Destroying the foreign currency bond market and reducing local government income.

The following chart is information that clearly shows that China's real estate sector is in crisis

1. Over a trillion dollars in declining sales

Real estate sales in 2021 and across China, peaked at 18.2 trillion yuan ($2.5 trillion). It has become one of the largest industries in China. So big that the president of China Vanke Co., one of the country's largest real estate developers, says he can't find another company that generates as much revenue as the real estate business.

But bad news came the following year. Sale of apartments and real estate Commercial sales nationwide fell by 4.9 trillion yuan, or 27%, the largest year-on-year decline since 1998, after the government took measures to curb the sector. Bloomberg estimates that sales are likely to fall by 1.8 trillion yuan this year.

In 2024, Bloomberg analysts expect real estate sales to shrink further and project developers are likely to face more liquidity problems.

by S&P Global Ratings expects the worst scenario. Sales could fall to about 10 trillion yuan, which would return sector activity to levels seen in 2015, when the Chinese economy was about half its current size.

2. From “GDP engine” to derailment

The real estate sector has changed its role from “growth engine” go to “It's a burden on an economy that's getting worse.” Total revenue fell by 51 billion yuan in the first three quarters after falling by 340 billion yuan a year ago, data from Bloomberg showed.

Moreover, some analysts are concerned about the consequences of the collapse of the sector. Because according to Ren Ziping, a famous macroeconomic analyst, former chief economist of China Evergrande Group said:

Because the real estate sector, by connecting more than 60 sectors in China, the impact of the spillover ranges from upstream industries such as resources and building materials to downstream industries such as home appliances and leasing companies.

by Bloomberg Economics It is estimated that real estate-related activities contributed from 1.6% of China's GDP to 7% in 2015, while the share decreased last year to about 1.3%.

3. Total investment from the real estate sector contracted.

Weak sales have prompted real estate giants such as Country Garden Holdings to default on debt, affecting several sectors. Specifically, investment in real estate development fell by 1.47 trillion yuan in 2022, and then worsened further in the first 11 months of this year.

4. Shrinking local government revenues

Data from the Chinese Ministry of Finance revealed this Local governments have received less income from land sales since the housing sector declined, and that income, which fell by 23% in 2022, shrank by another 18% in the first 11 months of this year compared to last year. Even as Beijing eases restrictions on land sales, turmoil in the sector continues.

Since the peak in 2021, government revenue from land and real estate activities has fallen by 3.1 trillion yuan when property-related taxes are taken into account. Concerns aboutLocal government debtThis increase has prompted the Chinese government to issue additional fiscal stimulus measures. This included an extraordinary budget review and the sale of another trillion yuan of government bonds.

5. High incidence of defaults among real estate developers

beforeDefault on debt payments by the real estate developer This is something that is difficult to overcome. It was once the most popular bond trading in China.

Before 2020, the Chinese government will launch this policy “Three red lines” Or three red lines to limit borrowing in the real estate sector. Most foreign currency denominated junk bonds in China are issued by real estate developers. Returns averaged more than 9% annually between 2012 and 2020, compared to less than 7% for comparable U.S. bonds.

Bloomberg's analysis revealed that the stock market mortgages are now all dead. Since 2020, defaults have risen dramatically, reaching $133 billion as of December 11, and foreign investors are absorbing most of the losses.

6. The market value of the real estate sector decreased.

Chinese property stocks remained stuck in a downtrend near 14-year lows as of mid-December. The country's top 10 private real estate developers have lost a total of HK$1.1 trillion, or 84%, in market value since the beginning of January 2020.

7. Families' ability to spend has declined.

Official data shows that existing home prices have fallen by 8% since their peak in July. 2021 with information fromBloombergIt was noted that real estate prices in major cities fell more than other cities.

A 5% drop in prices could result in losses of 19 trillion yuan in housing trade and impact 430 billion yuan on household spending capacity.

8. The number of employees in the real estate sector who are losing their jobs is increasing.

The above calculation does not include the impact of job losses. This means that the real impact of the collapse of the real estate sector is on himHousehold spendingIt may be more serious than it seems. From the real estate developer Some of China's largest private companies have cut jobs by about 80% since the country issued the “three red lines” rules.

9. The fortunes of China's real estate billionaires are declining.

Chinese property tycoons were ranked among the country's richest people, with China Evergrande Group's Hui Ka Yan competing with Jack Mavor for the top spot. Since the end of 2019

But after all the events Wealth of real estate businessmen The decline of at least $97 billion is largely due to the shrinking market value of their companies.

10. More and more people came out to protest.

Since June and in 2022, more than 1,800 protests related to the real estate sector have occurred in mainland China, according to the project. Freedom House China Opposition Monitor About two-thirds of the cases involve homebuyers protesting the issues. Such as delaying projects and neglecting work.

While the rest are mostly construction workers demanding wages. 1 in 7 homebuyer protests is related to a previous protest.Local protestsThey are usually scattered and dissipate quickly.

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Bloomberg