As Beijing pushes consumption initiatives to rejuvenate the economy, many citizens, including He Ying, are cautious about making large investments like property purchases. Amid China’s faltering property market and economic challenges, coupled with personal challenges such as a reduction in household income, the decision to delay buying a home seems reasonable for many.
He Ying, a 36-year-old human resource manager, had been saving for a down payment for years. This year, however, due to her husband’s unstable income and him having to relocate for work, they decided against it. Their story isn’t unique. The current property market scenario in China and significant demographic changes have made many middle-class Chinese citizens reluctant to buy big-ticket items, including houses, even with the government’s encouragement.
He Ying notes, “Property prices are falling. Many young individuals are opting against marriage, purchasing homes, or having children. It makes more sense for me to hold onto my cash.”
According to data, property investment in China has decreased by 8.5% in the first seven months of 2023, compared to last year. This drop represents the most significant decline this year. The property sector’s troubles are evident in these numbers, as sales are down to 60% of what they were in July 2019. This downward trend is impacting the job market and overall consumption.
Historically, since 2021, the Chinese property market has shown signs of weakening, further amplified by significant events like Evergrande’s bond default and mortgage boycotts in 2022. Recent events, such as Country Garden, China’s most significant private property developer, struggling with liquidity, have raised further concerns.
Ren Zeping, an influential economist, emphasized the need for a more transparent housing market. “The real estate sector is critical for economic growth, managing financial risks, and job creation. It’s imperative to stabilize this market,” he remarked.
Acknowledging the ongoing challenges, policymakers have been modifying property policies. As of late 2022, they eased funding restrictions, and several cities lifted purchasing constraints. Beijing’s approach now seems to be more focused on avoiding a crash in the property market rather than just preventing it from overheating.
A 20-point plan unveiled by Beijing on July 31 aims to boost consumption and address housing issues, especially for urban newcomers and young people who feel they’ve been priced out of the property market. However, some experts, like those at Societe Generale, doubt the effectiveness of these policies in truly reviving the housing sector.
Wang Qiuyue, aiming to buy a larger apartment, hopes for further loosening of home-purchasing restrictions. He said, “I’m concerned about my job prospects. Being unemployed would be disastrous for my family.”
Interestingly, a survey by the People’s Bank of China reveals that fewer households intend to buy flats in the coming months. In contrast, more expect property prices to fall.
Yu Qian, a young English teacher, recently relocated with her family. She noted, “All of my friends who bought homes recently regret their decision.”
Cai Fang from the Chinese Academy of Social Sciences warns of the risks from declining confidence in residential consumption. “The aversion to property buying, if not addressed soon, could have long-term implications,” he said.
For some, like Lin Suzhen, the willingness to spend is there if viable options are available. He remarked, “I’d buy a car immediately if Beijing relaxes auto-plate restrictions.”
The importance of stimulating residential consumption cannot be understated, Cai notes. He believes that increasing residential income and allowing rural migrant workers to acquire urban hukou would unlock new demand.
Data from China’s central bank in 2019 revealed that housing made up about 70% of urban household assets. Eli Mai, a sales director, has witnessed the fluctuating value of his properties over the years. “Ordinary homeowners feel their wealth is diminishing. This sentiment is likely impacting the economy and spending habits,” he said.
Li Wei, a freelance copywriter, spoke about the burden of her mortgages. Purchased during a boom, the current market values of her properties are below her purchase price. Adding to her woes, payments for her freelance work are delayed.
This detailed snapshot of China’s property landscape underlines the sector’s vulnerabilities and the potential long-term repercussions on the nation’s economic health.