From 2021, when the bubble of the Chinese real estate had begun to present its first symptoms of dissolution, until the present complete collapse of the housing market has only been five years. China is experiencing one of the biggest financial corrections of its modern economic history.
The Index of Real Prices of Residential Properties or «Real Residential Property Price Index», which presents real estate prices rather than those spent in their accounts banks and residential development companies have returned to the 2010 levels. According to the Bank for International Settlements (BIS) the RRP Price Index has declined to the levels of 86.79 units. Sensory below the 2010 levels, located at 100 units.
Given that about 25% to 30% of China's GDP comes from the real estate sector and that real estate is their only assets for most Chinese households, the problem escapes its narrow economic dimensions and becomes social. In China, real estate averages 70% of household assets.
Already after the residential explosion that followed the urbanisation of China's rural population, the Chinese government had introduced its policy of «three red lines», aiming to limit the excessive leverage of large construction companies such as Evergrande and Country Garden, which have been in a dire economic situation for months. However, this move that began as an attempt to reorganise the residential development sector, developed into an unprecedented liquidity crisis that froze hundreds of construction sites and shook the trust of potential buyers.
In essence, the Real Estate Prices Index recorded 17 consecutive fall quarters and has returned to levels below 2010. Cancelling in practice about a decade and a half of accumulation of wealth for the average Chinese family. In many cases it repays a loan whose nominal value is far below its actual market value.
So families who had bought mostly apartments considering that their price would rise perpetually, now see significant losses in their property. The result is to follow reduced consumption, hesitantness for new markets and a vicious cycle that makes recovery difficult. The crisis has already cost the Chinese economy around 2 percentage points of growth (GDP) annually in previous years.
The decline in actual prices over the last 12 months is close to -6.3%. While the nominal marker before starting to retreat and reach 86.79, it had peaked near 146 within 2021. These extreme changes are a clear indication of a structural correction and not just signs of a transient cycle.
The property crisis began to become apparent from the top of 2021, through a series of problems. By overborrowing developers, with high leverage, with excessive dependence of GDP on construction activity and with the property as a key savings and investment option for households to be shaken. The collapse of investment in real estate and the decline in the sector's share of GDP in about half, compared with 2021 mark a strong multiplier of negative impact on employment, consumption, banks, and local governments using land and land sales as basic revenues.
Liquidity pressures are borne by credit institutions and their balance sheets «developers» The Bank is obliged to adopt stricter control over loan disbursements. Investors' confidence is also affected by the fiscal finances of local governments, both showing reduced revenues from land sales and increased debts.
Beijing's first measures, which relate more to the regulatory framework of the housing market, led to the emergence of some evidence of stabilisation in metropolitan real estate markets, such as Beijing and Shanghai. However, in the Chinese region chaos remains. Goldman Sachs analysts warn that the Chinese real estate market may not touch the bottom before 2027, stressing that local and regional diversifications will determine the potential and pace of recovery.
Experience in the West shows that policies that limit long-term risk, such as the management of red loans, known NPLs, credit line restructuring and the redefining of business planning of developers, lower advance limits, loan facilities and transparent recording of transaction prices are more decisive than direct monetary or fiscal measures.
After all, trust is not built by decrees. It takes time, structural reforms are needed, perhaps even greater acceptance of the idea that prices must find their real bottom before they start to recover sustainablely. Something that property owners and mortgage borrowers can hardly accept.
The real estate crisis in China is not just «one sector» suffering. It is the core of the old Chinese development model based on investments, construction and debt. The transition to a new model, based on consumption, technology and exports, proves to be more painful and slower. Because exports and technology have supported Chinese development in recent years, but they cannot fully replace the internal demand that is significantly declining due to the decline in property value.
Ωστόσο, η κρίση της κινεζικής οικιστικής ανάπτυξης, έχει επιπτώσεις και εκτός συνόρων. Οι επιπτώσεις είναι έμμεσες, αλλά σημαντικές. Καταγράφεται μικρότερη ζήτηση για πρώτες ύλες όπως για χάλυβα και χαλκό. Και είναι διάχυτος ο φόβος για πιθανές αναταράξεις στις παγκόσμιες αλυσίδες εφοδιασμού. Ταυτόχρονα, μια πιο αδύναμη κινεζική οικονομία μπορεί να επηρεάσει τις γεωπολιτικές ισορροπίες, καθώς το Πεκίνο θα πρέπει να αναζητήσει άλλους τρόπους να διατηρήσει την εσωτερική σταθερότητα που βαδίζει σε επισφαλείς ατραπούς.
Μπορεί να ξαναβρεί άραγε το «κινεζικό θαύμα» τους ρυθμούς του, βασισμένο στην τεχνολογία, χωρίς το παλιό του στήριγμα, δηλαδή την ασταμάτητη άνοδο των τιμών των ακινήτων;
