Real-estate ills, sales slowdown spread to China
China has joined the United States, Britain, Spain and others on the list of nations hit with a real-estate decline.
New York Times News Service
GUANGZHOU, China — China has joined the United States, Britain, Spain and others on the list of nations hit with a real-estate decline.
Although the last national statistics showed single-digit growth from July 2007 to July 2008 in the average price of commercial and residential real estate, real-estate brokers say prices are down from peaks reached earlier this year, while the number of transactions has plunged.
This downturn comes as the growth rate of Chinese exports has slowed and stock markets have plummeted. The confluence of events has resulted in what economists describe as a deceleration in economic growth, although at nearly 10 percent China remains the envy of many nations.
In some areas of China, home prices have dropped 10 to 40 percent.
In other areas, transactions have fallen, but prices have only started to follow.
"People are thinking more carefully and taking much longer before they decide to buy or not to buy property," said Hwang Sha, a real-estate broker in Xiamen.
Export-dependent coastal cities in mainland China have had the steepest downturns in their real-estate markets. Some of those problems are starting to make ripples elsewhere in Asia.
Cities deep in China's interior are least affected.
But unlike the subprime meltdown in the United States and the resulting credit crisis, weaknesses in China's real-estate market do not at this point appear to pose a threat to the vitality or stability of the financial system.
One reason is Chinese banks require down payments of at least 30 percent, giving banks an ample cushion of cash against losses.
American banks frequently did not require down payments.
Foreclosures are also rare here, and many Chinese still pay cash for their homes, particularly in rural areas.
Leo Wah, a Chinese banking analyst for Moody's, said the banks could weather the decline in real-estate prices but cautioned they could face more challenges if economic troubles spread.
"We do not believe that it would cause a serious problem, but if property prices fall some more, it won't be the only sector that has problems," he said.
Copyright © 2008 The Seattle Times Company
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