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May 20, 2023 | Chinese Property Market in Turmoil Too

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel ( Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog:

The segment below offers interesting insight into the Chinese real estate cycle as the easy credit era ends. Similar trends are happening around the world, all at the same time.

The May Day Golden Week used to be one of the peak seasons for real estate sales in China. However, this year’s May Day holiday saw extremely quiet sales in property sales offices and second-hand housing transaction venues, with very few transactions taking place. Even first-tier cities like Beijing and Shanghai were no exception. For example, Beijing’s newly signed contracts for commercial residential properties were only 114 units, with a transaction area of only 14,000 square meters. This represents a decrease of over 60% compared to the same period last year when Beijing was almost under lockdown due to the pandemic. The market conditions are poor, and developers in urgent need of capital have to find ways to promote sales, with price reduction being the most effective method. However, under the rule of the Chinese Communist Party, it is not solely up to the real estate companies to decide on price reductions. Recently, a major news story emerged in the Chinese real estate industry. Two property projects in Kunshan City, Jiangsu Province, significantly reduced prices by 30% during the May Day period. As a result, the developers were fined heavily by the local housing and construction bureau and their online signing business was suspended. The real estate companies were required to rectify their actions, which also meant they were not allowed to engage in selling activities for a while. The explanation given by the housing and construction bureau was that unauthorized price reductions disrupt the market and make it difficult to sell neighbouring properties. Such unauthorized price reductions are considered dishonest and lack integrity and have been officially documented as misconduct in the annual integrity file! Here is a direct video link.

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May 20th, 2023

Posted In: Juggling Dynamite

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