A Chinese media Guancha.cn reported on February 22, economist Lu Ting discussed China’s real estate market during the “Economists’ Recommendations for China’s 2025 Economy” dialogue. He stated that China’s real estate market does not operate on an immediate transaction basis where payment and property delivery happen simultaneously. (Editor’s Note: China’s real estate sales are rather pre-sale in nature where buyers may end up paying mortgage for multiple years while waiting for the real estate company to finish building the property.)
Lu Ting further explained: “Many people assume the real estate market functions like typical markets, where an oversupply means developers have built too many unsold homes. But that’s not the case. The real estate market is more like a futures market due to our pre-sale system.” He noted that before this round of real estate contraction, “90 percent of new homes were pre-sold; customers paid but did not receive their homes.”
Thus, “(t)he key problem (in real estate) now is not that developers have built too many unsold homes, but rather that they have sold too many homes that they haven’t finished building.”
In May last year, China’s central bank announced a 300 billion RMB policy bank loan program for affordable housing to help local governments purchase projects from financially distressed developers. However, Lu remarked that it wouldn’t resolve the developers’ problem since they were looking for finished homes.
Source: Epoch Times, February 25, 2025
https://www.epochtimes.com/gb/25/2/23/n14443475.htm