There is no question that China’s real estate market is in winter; the severity and length of the downturn are gradually becoming clear. The questions now are whether the domestic real estate market will further deteriorate, how severe the situation will become, and what impacts it will have.
In our view, more and more signs indicate that the situation in the domestic real estate market is worsening, sounding an alarm for banks. Negative signals are almost present in every link of the real estate industry chain — land markets, real estate development, real estate sales, and real estate brokerage.
In the land market, many plots of land sold through public bidding in first- and second-tier cities between 2006 and 2007 remain undeveloped and cannot yet be brought to market. Some of these plots are completely idle, while others have been repeatedly transferred without any development taking place. In the real estate development phase, due to tight credit conditions leading to cash shortages, developers across the board have scaled back their development projects, with only a few listed real estate companies still having unspent funds from previous financings. Many financially weaker developers are barely surviving by selling projects and equity stakes. In the sales phase, the decline in volume has persisted for over half a year. Initially, there was a situation of high prices but low demand; now, this has progressed to actual declines in housing prices. As for the real estate brokerage industry, it has already encountered the "autumn wind sweeping away the fallen leaves" — a harsh chill affecting the sector first and foremost.