China’s unfinished property projects are 20 times larger than Country Garden

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HANGZHOU, CHINA – November 15, 2023 – An aerial photo shows a new building under construction in Hangzhou City, Zhejiang Province, China, November 15, 2023. On the same day, data released by the National Bureau of Statistics showed from January to October 2023, the national investment for real estate development was 9,592.2 billion yuan, down 9.3% year on year; Of this total, the investment in residential housing was 7,279.9 billion yuan, down 8.8 percent. (Photo credit should read CFOTO/Future Publication via Getty Images)

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BEIJING – The volume of unfinished, pre-sold homes in China is about 20 times that of real estate developer Country Garden at the end of 2022, according to a Nomura report on Wednesday.

Country Garden has become China’s largest non-owned developer in terms of sales. He had funding problems this year, and he defaulted on US dollar bonds last month, according to Bloomberg News.

“We estimate that there are about 20 million units of homes without construction and delayed pre-sales,” said Nomura China Chief Economist Ting Lu and team.

About 3.2 trillion yuan ($440 billion) is needed to complete the remaining units, according to analysts’ estimates.

Apartments in China are usually sold before completion. Making sure that the houses are built has been a priority for the government because delays make people less willing to buy new apartments.

At some point next year, the issue of home delivery may turn into a social issue and threaten social stability, and Beijing may eventually have to significantly increase policy support.

“In our view, amid the collapsing real estate sector and widespread credit collapse among real estate developers, homebuyers may become increasingly impatient as they waiting for the delivery of the newly purchased homes,” said the Nomura report.

“At some point next year, the issue of home delivery may turn into a social issue and threaten social stability, and Beijing may ultimately have to significantly increase policy support,” said the analysts. “We see this as the best way to restore confidence in the property sector and economy.”

Last year, many home buyers in China decided not to pay their mortgages on property purchases due to long construction delays. Developers have faced a financial crisis since Beijing’s crackdown in 2020 on their high reliance on debt. Last year’s Covid-19 restrictions also made construction difficult.

“Assuming 20% ​​volume growth in new home completions for this year, developers will only manage to deliver 48% of pre-sold homes between 2015 and 2020, leaving 52% still subject to delays,” Nomura analysts said.

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