Housing, once China’s ticket to wealth, is now a drain on wealth.

During the period of tremendous growth in the 1990s and 2000s, families developed Chinese They pumped their savings into real estate as they moved to cities and climbed the property ladder. With house prices constantly rising, this was a quick way to get rich.

Today, owning a home is more likely to destroy wealth than create it.

long fall in Real estate Over the past three years, it has caused widespread financial insecurity, especially among the middle class.

“It’s a painful lesson.“, He said Clara Liua 36-year-old government employee living with her husband in HangzhouEastern City China Known for its technological and scenic scene. West Lake.

In 2022, they invested their savings in another apartment that they hoped to rent out or resell. Instead, the 89-square-meter apartment remains empty while Housing prices They’ve gone down. They can’t find a buyer without taking a huge loss.

“I will never consider buying a house as an investment again,” Leo said.

They are not alone. With 70% of family assets China Stored in real estate, every 5% drop in prices could destroy up to $2.7 trillion in wealth, according to estimates. Bloomberg Economics.

Real estate crisis It is one of the greatest challenges a leader faces. Xi Jinpingwho promised to deliver a “sense of profit” to ordinary people. Xi has spoken in recent weeks of the need for “practical measures that benefit people’s livelihoods and warm their hearts.”

But many people are feeling the chill of the housing crisis. which lies at the heart of the broader economic slowdown in ChinaWith people fearing losing money on their biggest asset, they are generally holding back on spending, further stagnation in the world’s second-largest economy.

Official figures this week showed that China’s economy It grew by just 0.7% in the second quarter of this year, well below expectations, leaving annual growth at a relatively low 4.7%.

However, measures to help the housing market are unlikely to play a major role in plans to support growth at a key meeting of the housing cabinet. Chinese Communist Party in Beijing Analysts said this week.

Central Committee of Communist Party It celebrates its “third plenary session” this week, an economic meeting held roughly every five years and used to promote far-reaching reforms.

In 1978, Deng XiaopingThe then-strong leader used that year’s plenary session to build consensus around his “reform and opening up” policy, which unleashed decades of rapid growth.

Use this year’s general meeting to announce strong support for the real estate market. Analysts say it would be one of the quickest ways to restore consumer confidence and stimulate an economy suffering from chronically low demand.

“The most effective way to stimulate the economy is by supporting the real estate sector,” he added. Gavekal Dragonomicsa research firm. And even if officials eventually have to do more, “they don’t seem eager to move at this time,” their analysts wrote in a note Monday.

So far, Xi has taken a cautious approach to reviving the faltering property market. He has rejected tough measures to boost economic activity or direct support for consumers, which liberal economists see as the fastest way to boost growth.

Instead, the government has been using gradual measures to try to restore confidence without triggering another cycle of bad debt. In May, officials promised easier access to mortgages, introduced an “old for new” home swap program, and led efforts to buy up unfinished developments and convert them into affordable housing.

“They’ve tried everything, to be honest.“, He said Alicia Garcia HerreroChief Economist for Asia Pacific in Natixisthe French investment bank. “It’s simply an overgrown sector. It’s too big.”

None of this made any noticeable difference. New home prices in the 70 largest cities in China It continued to decline in June, falling by another 0.67 percent compared to May, according to official figures.

Let’s take a case Foshana city of 9 million people near the manufacturing city GuangzhouRestrictions on non-residents buying property there were lifted in December, but that has done little to improve prices.

“Those who buy homes today are all people who really need them.“, He said Teng Laireal estate agent FoshanHe added that no one is buying as an investment, and even those who are buying for necessity are “waiting and watching to see if prices will be cheaper tomorrow.”

Instead of addressing this problem, Xi prefers long-term plans to turn China into a “science and technology superpower.” With a focus on emerging technologies such as artificial intelligence and advanced manufacturing of goods such as solar panels, electric vehicles and lithium-ion batteries.

But public perceptions of inequality have become more pronounced. A recent study showed that people’s confidence in hard work has declined while their concern about systemic injustice has increased.

When asked in 2009 or 2014, most people in China They considered their lack of effort or ability to be among the main obstacles to becoming wealthy. But in 2023, the most cited reason for being poor was inequality of opportunity, while an unfair economic system came in third, according to research by the Stanley Foundation. Martin Whiteretired sociologist from Harvard universityAnd Scott Rosellan economist from Stanford University.

“A public that is more uncertain about its future is less likely to engage in consumption or invest in new businesses,” the experts wrote. Center for Strategic and International Studies On the investigation last week. “So the most likely outcome of the sense of inequality is a slowdown in the economy.”

Monarchy can be a “centre of national power and people’s livelihoods”But he said authorities face a delicate balance between managing debt risks and making housing affordable. Liu Jiayan– Associate Professor of Rural Urban Planning at the University Tsinghua University“Just because it is important does not mean that there should be immediate and broad policies to protect the market.”

in age DengUrbanization and the rush to build and buy homes has changed society. China.

Only about a quarter of the population China They lived in cities in 1990, while today two-thirds of the country’s 1.4 billion people live in urban areas. Rising housing values ​​in inner cities have helped create a wealthy, aspirational, and upwardly mobile middle class.

This rapid expansion came to an abrupt end in 2021, when a series of defaults by indebted developers plunged the market into crisis. Prices and demand collapsed. Tens of millions of apartments now sit empty. Millions of unfinished apartmentswhich are often sold before construction begins, are facing delays because cash-strapped developers can’t pay builders.

Among those most affected by the consequences are people who have invested in the sector in recent years, such as Clara Liu and her husband..

“All of these people who got in late in the game are now facing prices that are much lower than when they bought in,” Garcia-Herrero said.

With so many new apartments unfinished or empty, some residents of upscale cities like it. Beijing, Shanghai And Guangzhou They’ve gotten creative. They’re increasingly looking at older – and cheaper – buildings that were previously shunned in favor of new construction.

Cheng Chaoping29 year old marketing manager at a cosmetics company in GuangzhouShe bought a two-bedroom apartment on the top floor of a four-story building built in 1995 in April, and the asking price had dropped by $55,000 in six months, leading her to believe she had gotten a deal.

“Many people think now is not a good time to buy” because of investment risks brought about by ever-changing policies, Cheng said. But “I think prices in first-tier cities like Guangzhou and Shenzhen will be relatively stable.”

(c) 2024, The Washington Post