China's Real Estate Market in Serious Trouble

China’s real estate market is in deep trouble, with property sales slumping by 25% this year alone. A confluence of factors, including China’s “Zero COVID Cases” policy, have seen property developers run out of capital to finish ongoing construction. 

This has resulted in hundreds of thousands of homebuyers staging a “mortgage boycott”: not paying their mortgage for delayed or stalled housing projects.

As recently as a week ago, homebuyers in 80 cities and 200 large projects across China had threatened to stop mortgage payments.

Home sales have collapsed by nearly 60% compared to a year ago, and the current year-on-year fall is said to be the worst in China’s history.

Across the country, real estate developers are desperately trying to sell homes by whatever means possible, even going the unconventional route of accepting down payments in wheat, garlic, and watermelons from farmers seeking to buy homes.

What does this mean for me? 

China’s real estate troubles started when the embattled developer Evergrande, facing a deep cash flow crunch, defaulted on loans. The contagion is threatening to affect some of the biggest developers in the country.

Roughly 70% of China’s household wealth is stored in property. By some estimates, the country's real estate sector accounts for as much as 30% of GDP.

With China being an engine of global growth, world economies are watching developments unfold, hoping a destabilized Chinese economy does not affect their markets.