China’s Unfinished Property Projects Are So Big, They Are Now 20 Times The Size Of Country Garden

In the intricate tapestry of China’s real estate landscape, a startling revelation surfaces—unfinished, pre-sold homes collectively outsize primary developer Country Garden by a staggering factor of 20. This revelation, emerging at the close of 2022, comes amid financial upheavals faced by Country Garden, once a titan in China’s property realm.

Ting Lu, Nomura’s Chief China Economist, and the research team paint a concerning picture, estimating around 20 million units of pre-sold homes languishing in unfinished states or facing delays. A formidable 3.2 trillion yuan ($440 billion) infusion is deemed imperative to breathe life into these dormant dwellings, highlighting the critical juncture of timely home deliveries for sustaining buyer trust.

Country Garden’s financial tribulations add a poignant note to the overarching narrative of a faltering property market. The company’s struggle with financing intricacies amplifies the broader backdrop of a sector grappling with collapse and pervasive credit challenges. The recent bond default is a poignant symbol of the industry’s financial squeeze.

Nomura’s report issues a prescient warning—prolonged delays in home deliveries could burgeon into a social issue in the coming year. Homebuyers may become increasingly restless as the property sector wobbles and credit issues proliferate. Nomura anticipates that this delay in home deliveries could metamorphose into a broader social stability concern, prompting Beijing to escalate policy support as a crucial measure for restoring confidence in both the property market and the broader economy.

The roots of these challenges trace back to Beijing’s 2020 crackdown on developers’ excessive reliance on debt, triggering a financing crunch. The subsequent year, rife with COVID-19 restrictions, further complicated construction efforts. Nomura’s projections indicate a sobering reality—assuming a 20% volume growth in new home completions for the current year, developers may only fulfill 48% of homes pre-sold between 2015 and 2020, leaving 52% of units mired in delays.

The convergence of delayed home deliveries, financial turmoil among developers, and the looming social instability pose a formidable challenge for China’s property sector. The imperative for Beijing’s decisive policy intervention looms as the nation navigates the intricate task of restoring confidence in the pivotal real estate domain and ensuring stability in the broader economic landscape.

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