A “slow-motion financial crisis” is unfolding in China due to the country’s real estate market collapse.

by Editor

BEIJING, According to a private survey released on Saturday, new home prices in China declined for the third consecutive month in September as a nationwide mortgage boycott and a sluggish economy turned away prospective buyers.

With official data showing a decline in home prices, sales, and investment in August, the world’s second-largest economy—which barely expanded in the second quarter—came under more pressure this summer as a result of China’s real estate market problem.

According to official statistics, prices for new homes in 70 Chinese cities dropped by a worse-than-anticipated 1.3% year on year in August. This reflects a turbulent year in which China’s housing sector went from being an unstoppable force for growth and prosperity to being the main threat to the world’s most powerful economy.

According to research released this week by Citigroup, nearly a third of all real estate loans are now categorized as bad debts, up from 24.3% at the end of last year. The growth is being driven by hitherto reliable state-owned real estate developers.

In general, 2 million off-plan homes in China are still unfinished, according to an S&P estimate. If revenues continue to decline and developers continue to lack the funds to finish projects, that number will rise.

According to S&P, “China’s property collapse has developed into a confidence crisis that only the government can resolve.” “Things will get worse if declining sales push more developers into distressed area. More pre-sold homes will have construction halted by the struggling companies, further damaging buyer confidence. Our best guess is that there are currently 2 million incomplete homes that Chinese developers presold. This has destroyed trust in this market.”

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