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The housing market in China has recorded a sharp drop in home sales throughout July as underlying economic problems become more evident.
Sales fell 39.7% in July from the same period last year, marking a decline of approximately $77.6 billion – or 523.14 billion yuan. June to July alone saw a 28.6% drop, ending a two-month rally.
Home sales had increased in May and June over the previous months, but July largely blunted those gains, according to The Wall Street Journal.
“China’s economy has been slowing for quite some time,”[ads1]; Craig Singleton, a fellow at the nonpartisan Foundation for Defense of Democracies, previously told Fox News Digital. “What we are witnessing now is a rapid economic decline.”
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Singleton argues that while COVID-19 has played a role in the initial problems, China’s slowdown in recovery is the result of “deeper structural, systemic problems.”
“One of them happens to be … China’s hyper-leveraged property market by some conservative estimates,” he said. “China’s real estate sector accounts for 30% of Chinese GDP, so even small deviations in that market can have an overall impact on China’s broader global domestic product and its broader growth.”
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The Chinese real estate market saw a sales boom fueled by debt-financed construction projects that sold homes before they were built. The lack of completed projects led to protests from angry potential home buyers who refused to pay their mortgages.
Hundreds of buyers from approximately 320 projects across the country as of July 29 have refused to pay their mortgages. These potential buyers have turned instead to buying second-hand homes or newly built state-owned homes, which can come at a cheaper price.
Even cutting interest and prepayments or directly offering cash subsidies has not helped to create enough activity to support the failing housing market. Local authorities have considered offering full assistance to cash-strapped developers.
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“The sector will not stabilize if developers’ liquidity crisis is not eased,” said Song Hongwei, research director at Tongce Research Institute.