NEWYou can now listen to Fox News articles!
That housing market in China saw a sharp drop in home sales in July as underlying economic problems become more apparent.
Revenue in July fell 39.7% from the same period last year, down about $77.6 billion — or 523.14 billion yuan. From June to July alone, there was a 28.6% drop, ending a two-month rally.
Home sales had increased in May and June from the previous months, but July largely mitigated those gains, according to The Wall Street Journal.
“China’s economy has been slowing for quite some time,” Craig Singleton, a staffer at the non-partisan Foundation for the Defense of Democracies, previously told Fox News Digital. “What we are witnessing now is a rapid economic slowdown.”
Singleton argues that while COVID-19 played a role in the initial problems, China’s recovery is slowing emerged from “deeper structural, systemic problems”.
“One of them happens to be … China’s highly leveraged real estate market by conservative estimates,” he said. “China’s real estate sector accounts for 30% of China’s GDP, so even small variances in this market can have an outsized impact on China’s broader global domestic product and growth.”
That Chinese real estate market experienced a sales boom fueled by debt-financed housing projects that sold homes before they were built. The lack of completed projects prompted protests from disgruntled homebuyers who refused to pay their mortgages.
Hundreds of buyers of around 320 projects across the country have refused to pay their mortgages as of July 29. These potential buyers have instead turned to buying used homes or new-build government homes, which can be less expensive.
Even cutting interest rates and down payments, or offering cash subsidies outright, hasn’t helped spark enough activity to prop up the flagging housing market. Local authorities have considered offering substantial aid to cash-strapped developers.
“The sector will not stabilize unless developers’ liquidity crunch is alleviated,” said Song Hongwei, research director of Tongce Research Institute.