Agency: Evergrande Group’s financial troubles, and the government policies that helped push it to the brink of collapse, have threatened an important economic driver: home sales.
For years, homes have been the main savings vehicle for Chinese families. Nearly three-quarters of household wealth in China is tied to property and real estate has grown to provide more than a quarter of the country’s economic growth by some estimates.
Now companies like Evergrande can’t afford to keep building. Some 1.6 million home buyers remain in limbo waiting for their apartments. Others are scared to put down money for apartments that might never be built.
“We are indeed seeing a very serious slowdown in the property market, with falling prices, sales and construction activity, and this is likely to drag down economic growth in the next couple of quarters,” said the director of an independent economic research firm.
Big picture: China’s 100 biggest real estate companies are expected to report that sales in September plummeted by more than a third compared with a year earlier.
Response: Beijing has been largely silent, but regulators have started to make moves to bolster the sector. The central bank has opened emergency spigots to make it easier for local banks to draw more money, just in case. Local governments have set up task forces to help manage the potential fallout.
Latest on Evergrande: On Monday, the company missed another round of interest payments on two U.S. dollar bonds, a person familiar with the matter said. Waiting for a lifeline, it halted trading of its shares last week in Hong Kong and announced the potential sale of a lucrative unit.