cross-posted from: https://lemmy.sdf.org/post/44824942
Foreign investors who once saw China’s booming property market as a sure bet are now facing some of their biggest losses in decades. What was once a $140 billion push into Chinese real estate has turned into a wave of distressed sales and write-downs, with global players scrambling to offload assets at steep discounts.
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Their retreat is adding fresh pressure to China’s already struggling property market, a sector that plays a huge role in the country’s economy.
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Distressed sales — where owners sell under pressure from debt or defaults — hit 114 billion yuan (S$20.78billion) across 2023 and 2024, a record 22% of all transactions, Bloomberg Intelligence data shows.
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All Sectors, One Struggle
The downturn is hitting nearly every corner of the commercial property market.
In logistics, once considered a bright spot thanks to the e-commerce boom, supply has outpaced demand. Even giants like Blackstone have started to sell. Earlier this year, it sold three logistics parks in southern China to a local insurance company for about 2.7 billion yuan.
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Even distressed-debt specialists like Oaktree Capital have had difficulty turning a profit.
In 2021, Oaktree seized control of Evergrande Venice on the Sea, a sprawling resort development in Jiangsu province, after the troubled developer defaulted on a $400 million loan. The project — envisioned as a Chinese version of Venice — included canals, a grand hotel, and a conference center modeled after the U.S. Capitol.
Oaktree has since restarted construction and handed over some homes to buyers, but sales remain sluggish. Apartments that once fetched up to 10,000 yuan per square meter in 2019 are now advertised at less than half that price.
The pain may not be over. Analysts warn that it could take years for the oversupply of commercial buildings to be absorbed. Rents in China’s office market fell nearly 7% in 2024 — the sharpest drop on record — and CBRE expects no meaningful recovery in new supply until at least 2028.
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“Global institutions are increasingly taking the view that this market won’t recover soon,” said Wilson. He expects office rents to keep falling through next year, and predicts that the nominal value of buildings in 2030 will still be below 2020 levels.
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So it’s cheaper to rent homes in China? God, wish that would fucking happen here.
It’s unfortunately not so easy. Many Chinese people poured a lot of money - some even their life savings - into property that is now worth much less than they paid or have never been built as the developer went bankrupt.
As one report on Evergrande said already in 2023:
In 2021, just months before the Chinese property giant Evergrande showed the first signs of crisis, Guo Tianran (whose name has been changed on request) and her husband bought an apartment off-plan for their only child from the top-selling developer.
The couple, nearing their 60s, had scrimped to afford the $30,000 (£24,500) down payment on the yet-to-be-built flat. They bit the bullet in pledging to use 75% of their income to pay for the mortgage.
“We wanted to help our son, to give him a place to start out on once he graduates from college,” Mrs Guo told the BBC earlier this month. But just months after their purchase, Evergrande’s facade began to crack.
In Henan, the central Chinese province where they had bought the home, building work ground to a halt.
“We saw the main frame being built, and suddenly we heard that Evergrande was falling. Then construction stopped last year,” she says […] “When I think about it, I cry,” says Mrs Guo about the home she had bought. “It’s hard, and I feel sorry for my son and myself.”
You’ll find more reports than this one, and they are devastating not only for institutional investors but also for retail customers like Mrs. Guo in this report.
…the article literally says rents are down 7% on the whole.
I’d love if rents trended down here. I couldn’t really care about investors.
Many Chinese people poured a lot of money - some even their life savings - into property that is now worth much less than they paid or have never been built as the developer went bankrupt.
I couldn’t really care about investors.
These aren’t investors. This was how a regular person bought a house. Housing market was so hot, you couldn’t buy an existing built home/flat. You had to put all the money down for the purchase of the home prior to it even existing. You’re still paying rent or living with your parents at this time. Then the company building your home goes out of business and you have nothing. No home, and you’ve already spent all the money to buy one. Even worse, you could come up with more money and try again, and again lose all your money and have no home.
In China there are also large social consequences for not having a home of your own. It could very likely mean you cannot have a wife because part of the social rules are you have a house and your new wife will help take care of your aging parents (which is also why parents put up money for their son’s house purchase).