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The housing market in China recorded a sharp decline in home sales in July as underlying economic problems become more apparent.
Sales in July fell 39.7% from the same period last year, representing a decline of about $77.6 billion – or 523.14 billion yuan. Only from June to July was there a 28.6% decline, ending a two-month rally.
Apartment sales had surged in May and June in recent months, but July largely wiped out those gains, according to The Wall Street Journal.
“The Chinese economy has been slowing for quite some time,” Craig Singleton, a fellow with the impartial Foundation for Defense of Democracies, previously told Fox News Digital. “What we’re seeing now is a rapid economic slowdown.”
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Singleton argues that while COVID-19 played a role in the initial problems, the slowdown in China’s recovery is due to “deeper structural, systemic problems”.
“One of them just happens to be… China’s hyper-leveraged real estate market by some conservative estimates,” he said. “China’s real estate sector makes up 30% of China’s GDP, so even small deviations in that market could have an inordinate impact on China’s broader global domestic product and its broader growth.”
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The Chinese real estate market saw a sales boom, driven by debt-funded construction projects that sold homes before they were built. The lack of completed projects sparked protests from angry potential homebuyers who refused to pay their mortgages.
Hundreds of buyers of about 320 projects across the country refused to pay their mortgages on July 29. Those potential buyers have instead switched to buying second-hand homes or newly built state homes, which can be cheaper.
Even cutting interest rates and down payments or outright offering cash subsidies have not generated enough activity to support the slumped housing market. Local authorities have considered offering full relief funds to cash-strapped developers.
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“The industry will not stabilize unless the developer liquidity crisis is alleviated,” said Song Hongwei, research director at Tongce Research Institute.