New “Flaw” Could Wipe Out China!

New “Flaw” In Market Could Bring China To Its Knees

(HorizonPost.com) – The Chinese real estate economy is buckling at the knees under the immense pressure, bankruptcies, and lack of confidence in the market as a result of the communist country’s zeo-COVID-19 policy, according to a report from defense and national security website 19FortyFive. The slowdown in home sales is a result of the lack of confidence in the market, which in turn is a result of the COVID policy that has crippled the industry with unmitigated lockdowns.

As developers are filing for bankruptcy, Chinese citizens are refusing to pay their mortgage for incomplete housing. Just last year, in 2021, real estate giant Evergrande left incomplete 1.3 million housing units after Chinese households expended their savings on large down payments. The average delay on completing these homes has reportedly been 14 months, but luckily for the real estate market, only a fraction of these delays has caused the mortgage boycotts.

As land sales fell by 35% in August, developers, supply chains, banks and local governments may really begin to feel this problem. Defaulted developers, such as Evergrande, SUNAC and Greenland will further be impacted as they are behind on development because homebuyers’ lack of confidence is slowing down the purchase of new properties.

Home sales dropped 23% year-on-year as of August with a drop in pre-sales, which makes up 86% of Chinese developers’ funding. China’s “three red lines” policy enacted against developers restricts additional lending to them by banks, causing a negative chain effect on the market.

“As housing units are left unsold, developers prefer not to invest in new projects. This has a chain effect on related sectors such as construction materials, household appliances and furniture. Fixed asset investment in the real estate sector accounts for one-third of China’s total fixed asset investment, directly affecting growth. The weaker demand for other related sectors also adds to the impact of the real estate demise on GDP growth,” 19FortyFive reported.

The outlet added that banks are now also facing financial instability because they rely on mortgages, which account for 11% of bank assets, more than developers, which accounts of 4.5%.

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