Since China’s zero-corona policy ended late last year, property broker Wu Hong has been so busy looking for new prospects that he hasn’t had time to play cards with his colleagues. “Now I spend so much time talking to clients that I often have a sore throat,” he says.
But her efforts haven’t translated into sales.Sales of new houses in the eastern city of Wuhu China Located about 300 kilometers from Shanghai, the number increased by 10% last month from 448 in December. But that’s almost two-thirds less than his 1,341 properties sold in January 2022.
Wuhu’s slow property recovery highlights the challenge for Chinese policymakers to revitalize the country’s economy. real estate marketa key growth engine that has struggled over the past two years under government crackdowns and Covid-19 controls.
There are many unsold homes in Wuhu, even by the standards of other Chinese cities, said the person briefed on the situation.
“Homebuyers are back,” said an executive at a developer working on a project in Wuhu. “But they are being more cautious in making decisions, fearing a further drop in the softening price.”
China’s real estate sector is estimated to account for about 30% of total economic output and is closely tied to local government finances. The local government generated 6.7 trillion yuan ($990 billion) — or a third of his total fiscal revenue — from land last year. Selling to Developers.
However, the government limits high levels of leverage in the sector with the aim of limiting speculation and risky lending. “Three lines” policy — Developer funding ran out, forcing some developers into default, project freezes, and home sales and prices plummeting.
According to financial data provider Wind, sales of new homes in China’s 30 major cities will drop 31% in 2022 and continued to decline last month.
In Wuhu, the average 90-square-meter apartment cost about RMB 900,000 ($133,000) last month, down a fifth from a year ago.
Reopening the country and even the government Relaxation of leverage limits “Economic fundamentals are too weak to support a dramatic turnaround in real estate,” said Bo Chuang, Singapore-based economist at Loomis Sayles.
This allows developers to take aggressive steps to revive salesInstead of sticking to state-imposed minimum prices, introduced to protect local government revenues, Golden Scale House, a Wuhu suburban housing project, will receive a RMB 230,000 renovation a month after the sale closes. provided subsidies.
Sales in January were up three months from the previous month, but GSH officials said the project made little profit after discounts, costing about 20% more than the price of an average three-bedroom apartment. %.
“2022 has been a very bad year,” said the source, who asked to remain anonymous. “You have to generate cash flow to survive.”
Wuhu’s aging population is also contributing to the decline in housing prices. Like many cities in the hinterland, the city has faced an exodus of young people, a major source of demand for new homes, in recent years.
“People in their 20s would rather rent a basement in Shanghai for a future than stay with their parents and work 12 hours a day in a factory with little chance of growth,” said an official at the Jiujiang District Labor Market. said.
At 1 Park Avenue, a popular residential complex outside Wuhu that was completed and sold out seven years ago, more than 10 percent of the apartments have never been sold, according to internal documents from the local Homeowners Association. not being used. Brokers said many were bought as investments in hopes of higher prices.
Eager for the market to recover, the Wuhu local government has announced a number of incentives, including home purchase subsidies worth up to 10% off, from late 2022 onwards.
“With so many existing homes available at discounted prices, how do you expect the price of new homes to rise?” said a developer operating in Wuhu.
Local homebuyers expressed caution. “There’s no need to rush when the market is still weak,” said Li Hui, a 30-year-old office worker in the city who has been looking for a three-bedroom apartment for three months.
Local governments also stepped in to help sell land on which the government relied to meet its objectives. Last month, the Wuhu City Finance Bureau set his 20% growth target for land sales this year.
The developers are still not convinced. “It will take a long time to restore trust,” said an executive at Wuhu Development Company, which has no plans to expand in the city. “We are still a long way from there.”
