'Hengda Group Crisis Fallout' China's Residential Real Estate Sales Decline for 3 Consecutive Months

[Photo by AP Yonhap News]

[Asia Economy Reporter Park Byung-hee] Bloomberg News reported on the 18th (local time), citing data from China's National Development and Reform Commission, that China's residential real estate sales last month decreased by 16.9% year-on-year in terms of price.

China's real estate sales have declined for three consecutive months since July. Sales fell by 7.2% and 19.7% in July and August, respectively. Residential real estate sales in China surged by 143.5% in February but the sales growth rate slowed over the next four months to 63.3%, 34.7%, 20.1%, and 9.1%.

Real estate investment in September also decreased by 3.5% year-on-year, marking the first decline since the COVID-19 pandemic.

China's second-largest real estate developer, Evergrande Group, has fallen into a liquidity crisis, causing the Chinese real estate market to cool rapidly. Housing construction projects promoted by Evergrande have been halted in many places, leading to a sharp drop in home purchases. Citigroup recently reported, citing data from China Real Estate Information Corporation (CRIC), that Evergrande's home sales plummeted by 93% in September.

Since the real estate market accounts for a large portion of the Chinese economy, concerns are growing that an economic slowdown will spread throughout China. According to Goldman Sachs, real estate accounts for 23% of China's gross domestic product (GDP).

In fact, the GDP growth rate for the third quarter, released by China's National Bureau of Statistics on the same day, dropped sharply to the 4% range. The third-quarter GDP growth rate was announced as 4.9% on the 18th. China's GDP growth rate was 18.3% and 7.9% in the first and second quarters of this year, respectively, but it fell to 4.9% in the third quarter. This was below market expectations of 5.0 to 5.2%.

Helen Chao, Chief Economist at Bank of America (BOA), said, "Because of the uncertainty, no one wants to buy new real estate," adding, "The economy could slow down further."

The Chinese government plans to release housing price indicators for 70 major cities on the 20th.