Prolonged Real Estate Slump in China... Market 'Shock' Over Female Billionaire's Resignation News

October Home Sales Down 28% Marking 15 Consecutive Months of Decline
Shares Plunge 40% Intraday Following Resignation of China's Top Real Estate Tycoon
Corporate Debt Repayment Pressure Intensifies, Peaking in Q1 Next Year

[Image source=Reuters Yonhap News]

[Asia Economy Beijing=Special Correspondent Kim Hyunjung] China's housing sales continued to show a sluggish trend in October, entering a prolonged slump. The resignation of Wu Yajun, chairman of Longfor Group and a famous real estate tycoon, has further deepened the market sentiment that recovery will be difficult for the time being.

On the 31st (local time), Bloomberg cited preliminary data from market information firm China Real Estate Information Corporation (CRIC), reporting that the new home sales amount of China's top 100 real estate developers in October was 556.1 billion yuan (approximately 108.306 trillion won), down 28.4% year-on-year. The decline rate expanded further from 25.4% in September. China's housing sales have been declining for 15 consecutive months from August last year through last month.

Based on the real estate market, China's four first-tier cities (Beijing, Shanghai, Guangzhou, Shenzhen), which are comparable to Gangnam in South Korea, also recorded a price downturn. According to the National Bureau of Statistics, as of September, the new home sales prices in these four major cities fell by 0.1% month-on-month. This is the first time this year that new home prices in these cities have recorded a month-on-month decline. Among the 70 small and medium-sized cities surveyed, only eight cities including Shanghai, Beijing, Chengdu, Kunming, Hefei, Changsha, Luzhou, and Nanjing saw price increases for existing homes.

There is also analysis that the resignation of Wu Yajun, a representative real estate tycoon and the richest woman in China, reflects the outlook of the real estate market. Local media reported that Wu resigned on the 31st (China time) at a board meeting due to health reasons. Longfor Group, one of China's top 10 real estate companies, was known to have faced a liquidity crisis last year amid the Evergrande default incident. Following the news of Wu's resignation, Longfor Group's stock price plunged more than 40% intraday on the Hong Kong stock market on the 31st. China’s largest developer Country Garden Holdings and China Vanke also plunged 9.8%, hitting record lows as well. Kakeyram, head of investment at Hong Kong Metaverse Securities Fund, explained, "We will see more mainland real estate founders resigning," adding, "The golden age of Chinese assets is over, and there seems to be nothing more they can do."

Wu Yajun, Chairman of Longfor Group (Photo by Baidu.com)

According to the report, Chinese construction companies have debts amounting to $292 billion (approximately 417.0344 trillion won) that must be repaid by next year. This includes onshore and offshore bonds, loans, and domestic trust loans compiled by Bloomberg and research firm YouTrust. Henry Lo, head of Asia bonds at global investment firm Aberdeen, forecasted, "As repayment pressure peaks in the first quarter of next year, it will add more pressure to the already challenging environment of the Chinese real estate market." However, the report noted that the debt maturing on an annual basis in 2023 is $238 billion, about 25% less than this year, and is also a more manageable level compared to last year's peak of $381 billion, which is somewhat reassuring.

The Chinese authorities have attempted to stimulate the real estate market, a pillar of the Chinese economy, by easing home ownership regulations and lowering interest rates. However, as President Xi Jinping passed the 20th National Congress of the Communist Party without delivering messages on the housing market or easing zero-COVID policies, disappointment grew over the lack of substantial support. Chen Wenzing, associate research fellow at China Index Holdings, predicted, "The COVID-19 situation remains a key factor for the rebound of the Chinese real estate market."

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