China House Prices Fall For The First Time In Six Years As Evergrande Contagion Spreads
China’s home prices have fallen for the first time since 2015 on the back of the China Evergrande crisis.
According to the National Bureau of Statistics, prices of new homes in 70 cities slid 0.08% between August and September, marking the first drop since April 2015.
The news comes at a time when China is facing property crisis in the form of China Evergrande, which is the world’s most indebted developer with liabilities totalling USD 300 billion.
As developers struggle to raise money, buyers are no longer their go-to. Evergrande’s debt is mainly in the form of properties owed to buyers, so the buyer market has understandably cold towards developers.
Low demand results in low cash for builders, who are forced to then offer low prices.
September is usually peak season for the property market but residential sales fell 17% by area. However, whilst China’s housing market is feeling the brunt of Evergrande’s fallout, the contagion is contained.
Helge Berger, head of the fund’s China mission at IMF said Beijing has the ability to limit Evergrande’s impact. “People understand that the government has the tools to contain the risks going forward”, he said, adding that the risks are contained to the property sector.
Our stance at Bread has long been that Evergrande’s crisis will not unfold like the 2008 housing crash in the US. Moreover, we also believe Evergrande rivals Country Garden and Sunac won’t follow suit in collapsing.
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