Real estate fears weaken demand for land — and the buildings on it
Business & Technology
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Chinese land development has long followed a familiar process: cities appropriate and sell land to raise money, developers build it up, and the people whose land was appropriated get first dibs at the new property. But now, all three steps of the process have been disrupted:
- Cities are struggling to find land buyers. The source of 20% of cities’ revenue — sometimes more than from taxes — is in jeopardy, forcing officials to cut spending, introduce property taxes, or issue more debt.
- Developers’ bond prices are plummeting, pricing in the expectation of more defaults, making it harder to stay financially afloat and complete their projects.
- Would-be home buyers are getting cold feet. Sales at big developers Vanke and Country Garden last month fell by around a third year-on-year, possibly because people are unwilling to prepay for houses that might never be built.
However: It’s not all bad news for developers. In Hong Kong, real estate stocks rallied on news of a plan to address the territory’s housing shortage by building 500,000 new homes in the underpopulated north.
