Country Garden was once one of China’s largest private developers by sales. But the property giant has been on a tear this year, defaulting on a batch of dollar bonds last month.
"We estimate that the entire market has about 20 million homes that have been pre-sold to customers, but have not been fully built," Ting Lu, chief economist at Nomura Bank, told CNBC .
According to Nomura analysts, China needs about 3,200 billion yuan (about 10.7 million billion VND) to complete the construction of these houses.
Homes in China are often sold before they are completed, and the government is prioritizing construction and handing over homes to buyers. If they are delayed, people will be less willing to buy new apartments, which will reduce revenue for real estate companies and exacerbate the current crisis.
A Country Garden project site in Tianjin is deserted with workers (Photo: Reuters).
According to Nomura, amid the real estate sector crisis and many companies defaulting, buyers may become more impatient waiting for their newly purchased homes to be delivered.
The housing handover issue could trigger social unrest in 2024, and Beijing may need to step up its support policies. Experts say stronger government support is key to restoring confidence in China’s property market and economy.
Last year, many home buyers in China decided to default on their home mortgages due to lengthy construction delays.
"If the number of new homes completed this year increases by 20%, developers will only be able to deliver 48% of the homes pre-sold in the 2015-2020 period. This means that 52% of the remaining homes will continue to be delayed," Nomura analysts told CNBC .
Real estate companies have been in a liquidity crunch since Beijing launched a strategy to control leverage in the property sector. Covid-19 restrictions have also hampered construction.
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