It may take China a very long time to resolve its real estate troubles, with housing inventories taking up to 10 years to clear.
According to Hao Hong, economist at GROW Investment Group, China has about 6 million square meters of real estate under construction.
“At the current pace, it may take more than 10 years to resolve all this backlog. Thus, it may take many years to resolve all the problems in this field,” Mr. Hong shared. with CNBC.
Currently, home sales and home prices are still very weak in the context of real estate businesses falling into crisis since 2020, when Beijing applied the 3 red line policy.
Evergrande and Country Garden have become the two most notable “gods” of China’s debt reduction campaign. Real estate and related sectors contribute one-third of China’s economic activity.
An apartment project is being built in Jiangsu province, China (Photo: CNBC).
“China may need a long time to clear its inventory. At the same time, they must also find new growth drivers to boost the economy, instead of being too dependent on real estate,” he said. Hong shared.
In previous economic downturns, the real estate sector would respond quickly to stimulus packages and recover in just a few quarters.
“This time, it seems that the real estate sector’s bearish cycle will last longer. The market is not prepared for a long correction because they are used to a quick recovery like in previous waves, so they feel surprised,” Mr. Hong shared.
Despite a series of support measures, the real estate crisis has had a strong impact on consumer confidence and put enormous pressure on the economy. Therefore, many experts call on the Government to stimulate the economy more drastically to prevent the risk of a deeper decline.
