The Strategist

Business Insider: China is on the verge of housing crisis

11/26/2021 - 12:38

China is on the threshold of a housing catastrophe that the country has never been seen before. According to Business Insider, it will affect multiple generations of Chinese people at the same time.

The Chinese government's strategy has resulted in the growth of intra-family financing. Experts now expect that whole families will go bankrupt.

The nation is attempting to avoid the imminent default of Evergrande, one of China's largest and most important real estate developers; the company's position affects the country's housing industry.

At the same time, it should be remembered that China's homeownership rate is quite high: 90% of citizens own a home, and 20% own two or more.

In the country, the down payment for a residential property is 30-40 percent, while the down payment on additional properties acquired as an investment is already 50-60 percent.

According to a sociologist at the Chinese Academy of Social Sciences, the spike in property prices over the last two decades has caused most millennials (those born between 1981 and 1996) to borrow money from family to purchase homes.

According to some analysts, Chinese legislation has resulted in the development of the intra-family financing model, which is governed by rigorous regulations. Experts believe that in the worst-case scenario for China's housing market, whole families would suffer. Unlike in the West, the younger generation is frequently assisted in purchasing property by both their parents and grandparents.