Tears of Middle-Class House Poor... No Dreams of Dining Out Due to Loan Repayments

China's Real Estate Loan Balance at KRW 8,241 Trillion, 50% of GDP
President Xi Jinping Urges Housing Price Stability as Top Priority Next Year

[Asia Economy Beijing=Special Correspondent Jo Young-shin] #. Mr. A, who earns a monthly salary of 20,000 yuan, bought a house on the outskirts of Shanghai in 2018. On payday, exactly 15,000 yuan is automatically deducted from his bank account. He uses most of his salary to repay the loan, so dining out is out of the question.

#. Mr. B, who lives in Beijing, took out a loan of 1.95 million yuan (approximately 325 million KRW) to buy an apartment. He repays 10,000 yuan (about 1.68 million KRW) every month. With 60% of his monthly salary going toward loan repayment, he is living a financially tight life.

The outstanding balance of real estate loans in China has reached 49 trillion yuan (approximately 8,241 trillion KRW). This amount corresponds to 50% of China’s Gross Domestic Product (GDP). This figure also demonstrates that the frequently appearing articles about the "Chinese house poor" in Chinese real estate media reflect the actual situation. Because of this, warnings are emerging across China that real estate could become a financial minefield in the Chinese financial market.

Real Estate Loans Emerging as a Financial Minefield in China’s Financial Market

According to Chinese market research firm "Wind" and other real estate-related industries, as of the end of September, the outstanding balance of real estate loans in China totaled 48.83 trillion yuan. The outstanding balance of real estate loans in China first exceeded 10 trillion yuan in 2011, then increased exponentially each year: 21.01 trillion yuan in 2015, 32.2 trillion yuan in 2017, 38.7 trillion yuan in 2018, and 44.41 trillion yuan in 2019.

Despite the COVID-19 pandemic this year, the loan balance increased by 4.42 trillion yuan compared to the end of last year. This means that 10% of the total loan balance increased within just nine months.

In response to this situation, since July, the Chinese government has implemented 32 measures including ▲expanding the supply of residential land ▲cracking down on false divorces ▲raising the initial repayment ratio of real estate loans ▲and regulations requiring home purchases only after three years of household registration (in Shenzhen).

Although the Chinese government’s real estate measures and repeated warnings from Chinese leadership have brought some stability to the real estate market, prices in areas with development prospects are soaring.

A representative example is Shenzhen in Guangdong Province. In November, the average housing price in Shenzhen was 81,757 yuan per square meter (approximately 1.369 million KRW). The price per pyeong (3.3㎡) exceeds 45 million KRW. Housing prices in southwestern coastal cities such as Shanghai, Guangzhou, Sanya, Hangzhou, and Nanjing are also soaring.

A source in Beijing said, "There are many Chinese people around who have assets worth millions of yuan but live like low-income earners," adding, "Everyone is struggling under the burden of debt."

Xi Jinping: "Stabilizing Housing Prices Is the Top Priority Next Year"

Eventually, even Chinese President Xi Jinping stepped in. On the 11th, presiding over a meeting of the Chinese Communist Party Politburo, President Xi emphasized stabilizing housing prices as the top priority for next year. He stated, "Housing prices are causing wealth disparity," and urged, "We must promote healthy development through stabilizing the real estate market." It is very unusual for the head of state to mention real estate at a Politburo meeting.

Recently, there are also reports that the Chinese leadership is targeting large real estate development companies (sales market) in relation to the Chinese real estate market. There is suspicion that some fiscal policy funds are flowing into real estate, stimulating housing prices.

The Hong Kong South China Morning Post (SCMP) reported that the top 20 real estate development companies in China purchased land worth 1.5 trillion yuan from January to September this year. SCMP reported that real estate developers in China have been concentrating their land purchases in Hubei Province (Wuhan), Hunan Province (Changsha), Jiangsu Province (Suzhou), Shaanxi Province (Xi’an), and Sichuan Province (Chongqing).

The Chinese government is reportedly investigating the purposes and sources of funds for the land purchased by the top real estate development companies in China.

This content was produced with the assistance of AI translation services.