President Xi Jinping has long kept an eye on the country’s residential sector. When China held its 19th Party Congress in 2017, Xi warned that houses are for living in, not speculation. Soaring prices have imposed a heavy debt burden on most people, even as the wealthy strata snap up choice assets. In 2020, the Chinese government imposed what has been dubbed the “three red lines” framework meant to regulate leverage taken on by developers based on the metrics of debt-to-cash, debt-to-equity and debt-to-assets only. For the authorities, implementing stricter rules would deter speculative buyers and work towards building China’s property space into a controlled one that is growing steadily.
China’s US$2.4 trillion ($3.4 trillion) new home market sees little signs of near-term recovery amid a continued drop in home sale prices far into 2022. New home prices in China fell for the third month in September amid a mortgage boycott and a slowing economy. According to a survey published on Oct 1 by the China Index Academy (CIA), prices in 100 cities fell 0.02% in September from a month earlier, after 0.01% in July and August declines, respectively. Of the 100 cities, 56 posted a dip in monthly prices, compared with 69 in August, the survey showed. The National Bureau of Statistics will release official numbers for September on Oct 19.
With the 20th Party Congress on Oct 16, China is seen to provide further support in critical sectors such as energy and advanced manufacturing. Private property developers are probably wise to dial back any figment of similar expectations.
