{"id":352138,"date":"2025-12-16T13:46:11","date_gmt":"2025-12-16T13:46:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/352138\/"},"modified":"2025-12-16T13:46:11","modified_gmt":"2025-12-16T13:46:11","slug":"why-chinas-property-crash-must-be-kept-top-secret-dw-12-15-2025","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/352138\/","title":{"rendered":"Why China’s property crash must be kept top secret \u2013 DW \u2013 12\/15\/2025"},"content":{"rendered":"

The bigger the boom, the deeper and longer the bust. After two decades of runaway growth, by 2020, China’s<\/a> real estate bubble had pushed home prices to more than 17 times the average salaries.<\/p>\n

A perfect storm drove the boom, including reforms in 1998 that shifted housing from state provision to private ownership, the migration of nearly half a billion\u00a0Chinese from rural areas to cities and\u00a0abundant credit from state banks.<\/p>\n

A frenzy of construction transformed China’s skyline,\u00a0families poured savings into apartments and property speculation became the norm, helping millions of middle-class households to feel richer and spend more.<\/p>\n

The turning point came during the country’s first wave of COVID-19<\/a> lockdowns when President\u00a0Xi Jinping’s<\/a> government imposed sweeping new rules on how much debt property developers could take on.\u00a0The result of the “three red lines” reforms\u00a0was brutal. Real estate\u00a0giants like Evergrande<\/a>, Country Garden<\/a>\u00a0and dozens of smaller firms defaulted, with more than 70 developers either going bust or needing state-backed bailouts to survive.<\/p>\n

More than five years later, the\u00a0subsequent bust shows no sign of easing. According to Barclays, a British bank, more than $18\u00a0trillion (\u20ac15.38 trillion) in household wealth has evaporated as home values collapse. Meanwhile, construction activity \u2014 once a key driver of gross domestic product (GDP) \u2014 has slumped so badly that it now drags overall growth below Beijing\u2019s targets.<\/p>\n

Beijing censors private property data\u00a0<\/p>\n

In a sign of just how sensitive the downturn has become, Chinese officials last month\u00a0told private data providers to stop publishing home sales figures, cutting off one of the few independent windows into the current woes in the real estate market.<\/p>\n

The move followed a 42% year-on-year drop in new home sales by the top 100 builders in October, the largest\u00a0monthly drop in 18 months, according to China Real Estate Information.<\/p>\n

Anne Stevenson-Yang, founder and research director of the Taipei-based J Capital Research, thinks this move helps mask the true price decline.<\/p>\n

“You likely\u00a0have a market-wide drop of 50%, which could go down to\u00a085% before it balances out,” she told DW.<\/p>\n

Giving an\u00a0example of a colleague from the central city of Xi’an who was offered three homes for the price of one by a developer, Stevenson-Yang said it was the equivalent of a two-thirds drop on each property.<\/p>\n

In Tier\u20111 cities like Beijing and Shanghai, average home prices have slipped by about 10% from their peak, Oxford Economics wrote in September, with cooling demand for luxury units spurring even steeper markdowns.\u00a0The worst effect is, however, felt in Tier\u20112 and Tier\u20113 cities, including Chengdu and Dongguan, where values plunged by up to 30%.<\/p>\n

Half-built and empty apartments litter the skyline<\/p>\n

Across China, the crash has left\u00a0half\u2011finished projects, ghost cities\u00a0and millions of households trapped in negative equity,\u00a0sparking public anger and sporadic protests as buyers hope that Beijing will\u00a0step in with stimulus measures to shore up demand.<\/p>\n

“There’s still a lot of excess supply \u2014\u00a0up to 3-5 years of unsold apartments and housing, mostly in the smaller cities,”\u00a0George Magnus, research associate\u00a0at the UK’s University of Oxford China Center, told DW. “It’ll take a long time to clear, especially as\u00a0the cohort of first-time buyers \u2014 20-35 year olds \u2014 is now declining.”<\/p>\n

Having climbed to 1.41 billion, China\u2019s population is now slipping backwards, marking the end of decades of growth.<\/p>\n

\"ProductsDemand for construction raw materials, including steel and cement, is downImage: CFOTO\/CFOTO\/picture alliance<\/p>\n

China’s major economic\u00a0growth driver evaporates<\/p>\n

Real estate once accounted for up to a quarter of China’s GDP<\/a>, helping growth remain in double digits for more than a decade during the 2000s and early 2010s. The slowdown has since dragged economic growth<\/a> to around 5% last year\u00a0\u2014 still impressive, but down sharply from the boom years due to the knock-on effects on the rest of the country.<\/p>\n

\u201c[Chinese] steel and cement prices and output are dropping, employment and [business] investment are\u00a0weak \u2014\u00a0all of them collateral damage [from the property crash],” Stevenson-Yang told DW.<\/p>\n

China was the world\u2019s largest consumer of iron ore, copper, steel, and cement,\u00a0much of it tied to construction. Exporters Australia<\/a>, Brazil<\/a> and Chile<\/a> are among the global players suffering from the falloff in Chinese demand.\u00a0As homeowners feel the pinch,\u00a0the slowdown weakens household consumption, reducing imports of foreign luxury brands and autos.<\/p>\n

\"HomebuyersProperty long served as the cornerstone of household wealth in ChinaImage: Zhou Jianping\/dpa\/picture alliance<\/p>\n

Targeted stimulus, no broad\u00a0rescue<\/p>\n

Beijing is keen to avoid another speculative bubble,\u00a0so stimulus measures<\/a> to prop up the real estate market have not been as generous as in previous downturns. The Chinese government stepped in after the 2008 global financial crisis, the 2015 stock market crash and during the pandemic.\u00a0<\/p>\n

Rather than coming to the rescue this time, many China watchers believe the government is allowing\u00a0home prices to deflate gradually\u00a0so that policymakers can prioritize stability and long\u2011term restructuring over short-term stimulus.<\/p>\n

“You get to a point that you can’t stimulate\u00a0because the amount of money required would be too great \u2014\u00a0it would be inflationary,” said Stevenson-Yang.<\/p>\n

Bloomberg reported last month that Beijing is, however, considering subsidizing mortgage interest payments, lowering transaction fees and offering bigger income tax rebates for borrowers.<\/p>\n

\"AMillions of Chinese homeowners are in negative equityImage: Lian Fei\/Blue Jean Images\/IMAGO<\/p>\n

Prices could drop for many more years<\/p>\n

Property crashes typically take around five years to play out. In the United States<\/a>, the housing bust that began in 2007 took until 2012 for prices to stabilize. In Spain<\/a>, the post\u20112008 collapse also dragged on for roughly five years before recovery signs appeared.<\/p>\n

Japan\u2019s<\/a> post-bubble collapse, from 1991 to the 2000s, is often cited as the most prolonged real estate crisis, with home\u00a0values stagnating for more than a decade and never fully regaining their pre\u2011bubble highs.<\/p>\n

Stevenson-Yang believes the Chinese property sector is on course for another “10 years of negative or flat growth,” while analysts at S&P Global Ratings believe the downturn could persist well into the late 2020s. Some forecasts hint at recovery next year or in 2027.<\/p>\n

That\u2019s a hard pill for ordinary Chinese families to swallow. Many of them poured their savings into apartments that have lost value, leaving them stuck with mortgages they can\u2019t escape and homes they can\u2019t sell.\u00a0Worse still, property values may remain far below the dizzying highs of 2020 for the foreseeable future.<\/p>\n

The story is the same the world over, according to Magnus, where homeowners often assume that prices will continue to rise forever.<\/p>\n

“When the party ends and the cycle goes into reverse \u2026 the consequences can be very serious,” he told DW.<\/p>\n

Edited by: Rob Mudge<\/p>\n

How Xi Jinping’s authoritarianism is killing China’s economy<\/p>\n

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