China's real estate market, once the main driver of the country's rapid economic growth, has turned into one of its most serious problems. This sector, which stimulated demand, employment, and wealth accumulation for decades, is currently experiencing a decline for the sixth consecutive year. The consequences of this crisis are felt not only by millions of families in China but also affect the country's overall economic strategy and global trade.
The crisis in the Chinese real estate market gained further attention after a Chinese court sentenced former billionaire Hui Kaian, founder of China Evergrande, to life imprisonment last month. He was convicted on charges of misappropriating fund assets and bribery. The verdict underscored the depth of the crisis in China's real estate sector for the entire world.
However, the Evergrande problem is not an isolated case of one company. More than six years after financial regulators tightened control over heavily indebted developers, the real estate market has yet to find stability. Millions of unfinished residential buildings remain across the country. Land sales continue to weaken, and the pace of construction and new housing development is slowing down. Even in major metropolises like Beijing and Shanghai, the growth rate of new housing prices has decelerated.
The situation in smaller and less developed cities has been even tougher. In several of these cities, the price of used housing has dropped by approximately a quarter compared to 2020 levels, leading to a decrease in family asset values and weakening consumer purchasing power. Consequently, the real estate market, previously considered the foundation of China's domestic consumption, is now putting pressure on economic activity.
In the quarter ending in June, China's economy grew by 4.3% compared to the same period last year, marking the slowest growth in three years. Thus, the housing crisis has gone beyond just the real estate sector, affecting consumer spending, local government revenues, investment, and employment.