China has launched reforms intended to stimulate the ailing real estate industry in the country, to prevent an economic crash for the country. But analysts do not believe that the reforms are enough.
– You have to look at the entire real estate market, because it is misconstrued, says Kristina Sandklef, independent China analyst.
Around 50 million apartments in China are empty. Many of them have already been sold, but will perhaps never be completed, in the real estate crisis China, where several of the largest construction companies are balancing on the precipice of bankruptcy.
The real estate crisis has been going on for several years and now the Chinese regime wants to get both construction and home buying started. Therefore, the amortization requirements for housing loans are lowered, as well as the cash deposit requirements for young buyers – and interest rates are lowered, which benefits distressed real estate companies, which have had problems paying their gigantic debts.
Too expensive
The reforms do not go far enough, says construction worker Hu Yang to the Reuters news agency:
– Because the homes in Shanghai are too expensive, we can’t even consider buying.
Many Chinese are hesitant to buy a home, having seen others lose their savings:
– Right now I wouldn’t want to buy a home, says 28-year-old Shanghai resident Li Yang. According to her, it does not matter what measures the authorities launch, she does not believe that ordinary people will want to buy a home, as the situation is.
The expert: Not enough
Nor does the China expert Kristina Sandklef believe that the reforms are sufficient:
– There are still major structural problems in the real estate market, which must be reviewed, including how the local authorities finance themselves, and who has the right to buy housing, the rural population, for example, does not have the right to buy housing in the cities.
Before the crisis, the Chinese liked to save in housing, as an investment. Now the middle class is estimated to have close to 70 percent of their savings in real estate.
But when the country’s largest real estate company, Evergrande, suspended payments a year and a half ago, a bubble was exposed. The construction companies had borrowed imaginary amounts. Many Chinese had bought apartments that had not been built, and were without both an apartment and money.
Kristina Sandklef believes that the Chinese Communist Party will do everything they can to avoid a total collapse of the real estate market, but she sees no signs that any market economy reforms are underway.
– Since the legitimacy of the Communist Party depends very much on providing better living standards and economic growth for the people, Xi Jinping may end up being badly forced to carry out structural reforms that he might not really want to carry out, she says.