Monday, 13 May 2024 10:52

Real estate crisis in China

current state of the real estate sector in China current state of the real estate sector in China pixabay

China is grappling with a severe real estate crisis, particularly felt by developers such as Zhuoda Yidu. This company, like many others in the country, is struggling with huge debts stemming from rapid property market development in the past. The increase in debt significantly outstripped demand, leading to a situation where, in 2021, Evergrande, the world's most indebted developer, declared insolvency.

What will you learn?

1. What is the current state of the real estate sector in China?
2. What problems has developer Zhuoda Yidu encountered?
3. What impact do delays in apartment deliveries have on the residents of Tianjin?
4. What financial consequences for local governments result from the real estate crisis?
5. What measures have been taken to protect the interests of homebuyers in China?

Commitments to Buyers

Zhuoda Yidu, in an attempt to resolve its financial troubles, proposed a settlement to buyers. The developer asked them for additional payments on still-unfinished apartments, which would be completed in 2025 or 2026. The proposal did not offer an alternative option and was based on prices before the market value dropped, significantly increasing the financial burden on buyers. Ultimately, according to reports, about 90% of the buyers rejected the developer's proposal on social media.

Impact on Society and Economy

The syndrome of unfinished housing projects is not an isolated case in China, as confirmed by the situation in Tianjin and other regions, such as areas around Beijing, which gained popularity before the COVID-19 pandemic as places with cheaper housing options. This problem has negatively affected not only the lives of hundreds of families but also the finances of local governments, which lost significant revenues from land sales. The current situation in the real estate sector is also a significant burden on the Chinese economy, as evidenced by the financial troubles of cities such as Tianjin, characterized by one of the highest levels of debt relative to GDP among Chinese metropolises.

Source: CNBC

 
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