The housing market in China recorded a sharp decline in home sales throughout July as the underlying economic problems are making themselves more evident.
Sales fell 39.7% in July compared to the same period last year, recording a decline of about $77.6 billion – or 523.14 billion yuan -. Only from June to July saw a decline of 28.6%, which led to a two-month high.
Apartment sales in May and June increased compared to previous months, but July greatly dampened those gains, according to the Wall Street Journal.
“The Chinese economy has been slowing for a while,” Craig Singleton, a fellow at the Nonpartisan Foundation for Defense of Democracies, previously told Fox News Digital. “What we are seeing now is a rapid economic slowdown.”
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Singleton argues that while COVID-19 played a role in the initial problems, the slowdown in China’s recovery resulted from “deeper structural and systemic problems.”
“One of them happens to be … the Chinese real estate market is highly leveraged by some conservative estimates,” he said. “China’s real estate sector makes up 30% of China’s GDP, so even small deviations in that market can have a significant impact on China’s broader global GDP and its broader growth.”
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The Chinese real estate market has seen a sales boom driven by debt-financed construction projects that sold homes before they were built. The lack of completed projects led to protests from angry homebuyers who refused to pay their mortgages.
Hundreds of buyers from about 320 projects across the country as of July 29 had refused to pay their mortgages. These potential buyers have instead turned to state-owned used or newly built homes, which can come at a cheaper cost.
Even cutting interest rates and down payments or providing cash benefits outright hasn’t helped stimulate enough activity to support the deteriorating housing market. Local authorities have considered offering full relief funds to cash-strapped developers.
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“The sector will not stabilize if the developers’ liquidity crunch is not alleviated,” said Song Hongwei, director of research at the Tongsi Research Institute.