Home Buyers Entering Evergrande Want to Quit Now


China is seeking to cool off a costly and dangerously debt-ridden housing market, where high prices and continued levels of borrowing and spending are increasingly seen as a national threat.

But as the problems of a major real estate developer and a $300 billion debt mountain cause the government’s effort to contain the danger, Beijing risks damaging a key driver of its key economic growth engine: home buyers like He Qiang.

Mr. He was so optimistic about real estate in China that he bought an apartment from real estate developer China Evergrande Group, then became a real estate agent himself and sold the company’s apartments to hundreds of other families. “It was the pinnacle of Evergrande’s glory,” said Mr. He.

Much more pessimistic these days. Mr. He, from the southern city of Yueyang, has not yet moved into his flat as Evergrande has stopped construction. Many other people are nervous about buying a home, he said, considering going back to selling cars.

“People are no longer in the mood to buy property,” said Mr. He.

The real estate boom that once attracted young professionals like Mr. He is undergoing a dramatic overhaul. At one point, the purchase was so frantic that the properties would be sold within minutes of being offered. Speculation sent rising prices. Real estate has grown to provide more than a quarter of the country economic growth By some estimates, homes are becoming the main means of savings for Chinese families.

almost three quarters Household wealth now tied in China to the property. Loss of confidence in the market may cause further damage to the economy by causing sales of automobiles and white goods to fall. Already weak retail sales in China signal that consumers are feeling increasingly insecure. As more buyers shy away from home sales, experts say Beijing’s decision to intervene in the market and reduce its debt could put overall growth at risk.

“Indeed, we are seeing a very serious slowdown in the real estate market with falling prices, sales and construction activity, and this is likely to drag down economic growth over the next few quarters,” said Arthur Kroeber, managing director of Gavekal Dragonomiks. an independent economic research firm.

Evergrande was once the prime example of China’s real estate boom. Recently, however, news of a possible collapse shook global markets. owner missed several important payments While waiting for a lifeline to foreign investors in recent weeks, including Monday, it paused its shares last week and announced the potential sale of a profitable unit.

The company’s problems have led to recent comments from central bankers around the world and even the US secretary of state, who urged China to “act responsibly” when considering Evergrande’s future.

According to China Real Estate Information Corp., an industry data provider, China’s top 100 real estate companies are expected to report in September that their sales fell by a third from the previous year. Fantasia, a developer known for its luxury properties, unexpectedly default last weeksending shock waves through the financial markets.

The month may have been worse for Evergrande. The developer is already warned He told investors he expected a “significant continued decline” in sales. With their cranes and hammers stalling in cities around the country, nearly 1.6 million home buyers remain in limbo waiting for their apartments.

Mr. He said that friends and neighbors who were once interested in buying real estate said they were now worried about making a down payment on an apartment that could never be built. Families once lured by Evergrande’s stylish sales offices and impressive marketing stay away. “People are worried, ‘If I buy now, what happens if the developer makes a sale later?’” he said.

He doesn’t blame them.

Evergrande ceased business in its own apartment in June. Construction on three other sprawling projects in his city has either stalled or is expected to stop because the builders say they haven’t been paid. Dramatic headlines focusing on property in China are likely to keep home buyers away for more than a month or two.

Online government forums designed to solicit feedback from local citizens are now rife with complaints from angry families who have bought apartments from Evergrande. Some wondered whether they would continue to pay off a mortgage on an unfinished property. One used the forum to ask if his lifetime savings would simply be “discarded” if Evergrande went bankrupt.

A group of home buyers in a forum Guangzhou He said they learned that Evergrande had deposited the money from their down payment into a private bank account, not what the local government had envisioned and followed closely. Another home buyer in town meishan China’s Sichuan Province used the forum to plead with authorities, “Please do justice to your people!”

Even as leading investors questioned whether an Evergrande collapse would lead to China’s so-called Lehman moment, citing the investment bank that triggered the 2008 global financial crisis, Beijing has remained largely silent, vowing to no longer bail out companies once thought to be too large. mistake. Many local officials were left on their own to respond to growing frustration.

Local governments in cities are as far and wide as possible. xian, Shenyang and Chongqing Have each set up special task forces to help manage the potential fallout. An official in the south city shifangResponding to complaints at a government forum, the local building regulator, police and other government bodies met and informed developers and contractors of the “brutal consequences” they faced due to delayed construction.

Regulators, who had slowed down ownership, began making moves to support the industry if things went bad. China’s central bank issued a rare comment last month saying it would monitor the real estate market. While a showdown in financial markets is unlikely, the central bank is also emergency stoppers opened to make it easier for local banks to withdraw more money, just in case.

“It’s preparing firefighting equipment,” said Dinny McMahon, an analyst at Trivium, a consultant focused on China. “Obviously financial regulators are starting to get a little nervous about the way things are going.”

Without a clear message that Beijing will help Evergrande and other contractors continue with construction projects and deal with enormous debts, many Chinese families are holding on to their money and delaying buying new homes.

Mr. He is still waiting for news from Evergrande about his apartment. While the contractor has not sent him a notice of delay, he can see that construction on his building stopped a few months ago and he has to reconsider his plans to get married next May. The flat was supposed to be finished by the end of the year, which gave him time to decorate the space so it could feature prominently in the wedding festivities.

“Now with this delayed construction,” said Mr. He, “the wedding will also be postponed.”


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