On Oct. 7, dozens of homeowners gathered at the sales office of a new residential development in Nanyang demanding refunds. The value of their homes h

How China's housing market slid into a deep freeze

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2021-10-20 17:00:08

On Oct. 7, dozens of homeowners gathered at the sales office of a new residential development in Nanyang demanding refunds. The value of their homes had depreciated at least 30% in under a year after purchasing. The average price in a neighboring project by the same developer dropped more than 40%.

Nanyang, a city of 10 million in central China's Henan Province, is a microcosm of the real estate market in China's third- and fourth-tier cities. In the past few years, with large inflows of migrants from rural areas into smaller cities like Nanyang, developers such as China Evergrande Group and Country Garden Holdings rushed to build housing.

Then the central government, concerned about risky overheating in the property sector, moved to cool things down. Since President Xi Jinping declared in 2017 that "houses are for living in, not for speculation," policymakers have imposed a series of measures to limit rampant borrowing by developers and tighten standards for mortgage lending. The sector's industrywide chill reflects those policies as the world's most populous nation still faces a housing shortage, industry experts say.

Since the government curbed their borrowing ability last year, developers are experiencing a sharp drop in home sales, adding to their financial burdens. Since September, nine developers' credit ratings have been cut about 20 times. The debt crisis that may lead to the collapse of Evergrande, one of the country's largest developers, has heightened market concerns.

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