China: sharp decline in real estate values in Beijing and Shanghai
On June 15, China released May house price data. Beijing and Shanghai experienced the largest drop in second-hand home prices among 70 large and medium-sized cities.
The price of second-hand homes in Shanghai fell 0.8% from the previous month, the largest drop among the cities surveyed, while Beijing fell 0.6%.
Experts believe that the drop in prices in the two megacities is a sign of a bad economy.
US-based economist Davy J. Wong explained that most Chinese investors have limited themselves to real estate due to the current regime's limited investment channels.
He added that Chinese people generally believe that real estate is a better cushion against inflation and devaluation.
In China, local governments and developers, who set the market prices of new housing, have monopolized the real estate market; “but the second-hand market is quite free to maneuver and therefore reflects the real market in China,” he said.
In a 2019 report by the PBOC, the central bank, 74.2% of urban households' tangible assets were housing, in a nationwide survey of 30,000 urban households; while in the United States, real estate accounted for only about 30 percent of total household wealth, according to Chinese media reports.
The weak economy has forced everyone to cut back on consumption, Wong analyzed. The three-year zero-interest policy has ruined people's confidence in the future. According to Wong, many people choose to sell their properties to relieve financial stress: "It's risk management," he said.
Wong said falling second-hand home prices in Beijing and Shanghai suggest supply is too large for transaction volume to keep pace. China is therefore seeing a decline in demand for real estate. If demand falls then values fall and the whole wealth accumulated by Chinese families is reduced. Imagine the impact of the 74% drop in wealth of one billion two hundred million inhabitants?
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The article China: sharp drop in real estate values in Beijing and Shanghai comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cina-calo-forte-dei-valori-immobiliari-a-pechino-e-a-shanghai/ on Sat, 01 Jul 2023 14:03:04 +0000.