China’s Massive Housing Oversupply Critical Issue
Everywhere in China there are signs of the prolonged economic surge which sparked one of the biggest construction booms in history. The problem now is that China has a huge oversupply of residential properties and it’s sparking major investor fears. Perhaps one of the most defining numbers of China’s oversupply issue is the number of vacant properties in the country, enough to house 90 million people according to one calculation. That’s enough to house the total population of each of five G7 countries: France, Germany, Italy, the UK and Canada. The problem of oversupply of apartments and houses has been worsening for a number of years but China’s government decided to seriously tackle the problem last year. The communist government introduced the so-called “three red lines” last year as a response to oversupply of accommodation. The government limited developers' ability to borrow money - and build new projects - based on three key metrics which measured how much cash, debt and assets the country’s biggest developers had on their books. The scale of oversupply in China. Last month the authorities knocked 15 high-rise apartment blocks in the southern city of Kunming. The controlled demolition, which consisted of about 85,000 explosives, only took about a minute. The vast “ghost complex” had lay unfinished since 2013, when the developer ran out of money. Evergrande, one of world’s biggest and most indebted Chinese company is in debt to the tune of around $300 billion. Investors fear it would not be able to repay bond payments and what, if anything, the Beijing government would do. China is unlikely to let Evergrande fail, but they will definitely pump the brakes on the property construction boom. That’s going to hurt China’s gross domestic product, as the real estate sector contributes 29 per cent of the nation's GDP.
Tags : INTERNATIONAL Housing China Critical Issue Massive Oversupply