Posted 9/18/2023, 2:20:00 AM

Chinese Developers Trapped as Price Caps Block Inventory Sales and Market Recovery

Chinese developers are struggling as financing and sales dry up, but price caps imposed after the 2016 property crisis prevent them from slashing prices to sell inventory.
Price caps kept home prices stable but below what buyers were willing to pay. Now caps exceed market value, so developers offer discounts to work around them.
Home sales fell 27% in 2021 and are worsening in 2022 as price caps obstruct recovery.
Scrapping caps would allow developers to generate cash but could cause prices to plummet, angering homeowners.
Guangzhou has quietly dropped its cap, and more cities may follow to revive the property market, though it's unclear where undistorted prices would settle.

reuters.com

Relevant topic timeline:

8/20/2023

Chinese regulators pledge further steps to tackle debt and property risks

### Summary Chinese financial regulators have promised to implement additional measures to address the challenges posed by local government debt and the struggling property sector, which is currently one of the largest risks to the country's economy. ### Facts - 🏢 Chinese financial regulators are determined to tackle the issues surrounding local government debt and the property sector. - 📉 The property sector is considered to be one of the major risks to China's economy. - 🏗️ Country Garden, China's largest private developer, has further added to the woes of the already struggling property sector. - 📊 Financial agencies have been instructed to coordinate and provide support to local governments in their efforts to mitigate debt risks.

8/26/2023

China’s Economy Is Worse Now Than in the 1970s, This Analyst Says

China's property developers are facing a debt crisis and the country's economy is in a worse state than it was in the 1970s, raising concerns about a broader financial crisis, according to analyst Charlene Chu.

8/28/2023

China’s Debt Problm Could Trigger a Financial Crisis, Analyst Says

China's property developers facing financial distress raises concerns about a debt crisis, potentially leading to a broader financial crisis, according to analyst Charlene Chu.

8/28/2023

Paid Late, or Never: Painters, Builders and Realtors Hit by China’s Property Crisis

China's property crisis has left small businesses and workers owed hundreds of billions of dollars, with suppliers waiting on at least $390 billion in payments, as new projects dry up and financial troubles plague real estate developers like Country Garden.

9/1/2023

China relaxes mortgage rules to help homebuyers in latest stimulus push

China has lowered requirements for homebuyers in an attempt to revive its struggling property market and address the financial crisis.

9/7/2023

China debt risks loom over global financial system

China's real estate market slump raises the risk of developer defaults, potentially resulting in significant losses for Chinese banks and potential ripple effects beyond the country's borders.

9/21/2023

Financial Crisis Plagues Chinese Local Governments, Forcing Budget Cuts and Unfair Fines

Chinese city and provincial governments are struggling with a financial crisis caused by a mountain of debt, leading to desperate measures such as fining restaurants and truck drivers, as they grapple with the economic impact of the COVID-19 pandemic and real estate slump.

9/23/2023

Chinese Investors Struggle to Offload Overseas Properties Amid Economic Downturn

Chinese investors are rushing to sell their overseas properties, particularly in Southeast Asia, due to worsening financial conditions and the need for cash to solve domestic issues such as business failures and mortgage loan defaults. Uncertain economic conditions, low confidence in production and consumption, and tightening regulations on property developers in China have contributed to the struggle to offload these investments.

10/1/2023

China's Property Slump Threatens Banks, Local Governments and Long-Term Growth

China's property market blowup, which has led to major developers struggling and low housing sales, may not necessarily result in a financial crisis due to the unique characteristics of China's housing market and Beijing's control over the financial system, but it is expected to cause significant damage to bank balance sheets and potentially lead to widespread financial turbulence if support is not provided to local governments and small lenders.

Posted 9/18/2023, 2:20:00 AM

Chinese Developers Trapped as Price Caps Block Inventory Sales and Market Recovery

Chinese developers are struggling as financing and sales dry up, but price caps imposed after the 2016 property crisis prevent them from slashing prices to sell inventory.
Price caps kept home prices stable but below what buyers were willing to pay. Now caps exceed market value, so developers offer discounts to work around them.
Home sales fell 27% in 2021 and are worsening in 2022 as price caps obstruct recovery.
Scrapping caps would allow developers to generate cash but could cause prices to plummet, angering homeowners.
Guangzhou has quietly dropped its cap, and more cities may follow to revive the property market, though it's unclear where undistorted prices would settle.

reuters.com

Relevant topic timeline:

8/20/2023

Chinese regulators pledge further steps to tackle debt and property risks

8/26/2023

China’s Economy Is Worse Now Than in the 1970s, This Analyst Says

8/28/2023

China’s Debt Problm Could Trigger a Financial Crisis, Analyst Says

China's property developers facing financial distress raises concerns about a debt crisis, potentially leading to a broader financial crisis, according to analyst Charlene Chu.

8/28/2023

Paid Late, or Never: Painters, Builders and Realtors Hit by China’s Property Crisis

9/1/2023

China relaxes mortgage rules to help homebuyers in latest stimulus push

China has lowered requirements for homebuyers in an attempt to revive its struggling property market and address the financial crisis.

9/7/2023

China debt risks loom over global financial system

China's real estate market slump raises the risk of developer defaults, potentially resulting in significant losses for Chinese banks and potential ripple effects beyond the country's borders.

9/21/2023

Financial Crisis Plagues Chinese Local Governments, Forcing Budget Cuts and Unfair Fines

9/23/2023

Chinese Investors Struggle to Offload Overseas Properties Amid Economic Downturn

10/1/2023

China's Property Slump Threatens Banks, Local Governments and Long-Term Growth