Housing starts plummeted 25 percent last month from a year ago, a
severe blow for a country long buoyed by residential real estate
After almost two decades of nearly unceasing increases in real
estate prices and construction across China, one of the world's
longest-running bull markets finally seems to be stalling, with
broad consequences for China's economy and possibly its politics as
Housing starts plummeted 25 percent last month from a year
earlier, the Chinese government announced on Tuesday, a severe blow
for a country in which residential real estate construction has come
to account for one-ninth of all economic output.
Prices have started falling for new apartments and old ones, and
the volume of deals is drying up. The square footage of housing
transactions slumped nearly 16 percent last month, government data
showed on Tuesday, as sellers were reluctant to accept the discounts
that buyers increasingly demanded.
The correction in China's real estate market -- some economists
are even calling it the popping of a bubble -- is partly the result
of a deliberate decision by the country's leaders.
The Federal Reserve and other regulators in the United States did
not try to pop the American housing bubble in the decade leading up
to the market's slump in 2008.
But the Chinese leadership has been increasingly concerned over
the past several years that housing prices were rising to
unaffordable levels and that the economy was becoming overly
dependent on investment, and it has taken action.
The result has been a series of policies that include punitive
interest rates for mortgages on second homes, a ban on the purchase
of third homes and, more recently, deliberate action by the central
bank to keep short-term interest rates well above the rate of
inflation. Zhou Xiaochuan, the governor of the central bank, the
People's Bank of China, reaffirmed tight credit policies on
Saturday, saying that he did not think the economy was in sufficient
trouble to justify monetary policy stimulus.
In a country where real estate sales offices have become
ubiquitous and tower cranes are jokingly described as the national
bird, the question is how much further the real estate market will
slow, and whether its troubles will spill into other sectors of the
economy, notably the banking system.
In addition to delaying new projects, developers have sharply
reduced the speed at which they complete existing projects,
furloughing workers and shipping minimal steel to building sites.
Economic data released on Tuesday also included a deceleration in
industrial production, with growth in steel and cement output
slowing to a crawl. Retail sales also grew more slowly than expected
in April, with the furniture market stalling as fewer families moved
into new homes.
Su Hua, a real estate broker in Shenzhen, had his highest
commissions ever last year, as a speculative frenzy prompted
families all over China to buy and sell apartments at a brisk pace.
But he sat in a deserted office late last week with several silent
phones on his desk.
His business has been cut in half so far this year. More
worrisome for him is that the drying-up of the market shows no sign
According to Centaline, one of largest real estate brokerage
firms in China, transactions over the May 1 holiday weekend fell by
50 percent in Beijing and Shanghai from a year ago. The weekend is
traditionally one of the two biggest real estate buying times of the
year, along with a weeklong national holiday at the start of
"There is not much else I know how to do," Mr. Su said. "Maybe I
will consider selling insurance on the side, if business continues
A handful of real estate restrictions are already being
rescinded. State-controlled banks in Shenzhen, adjacent to Hong
Kong, have in the past two weeks stopped charging the extra half
percentage point to one percentage point above the regulated
national benchmark rate for mortgages that they had been collecting
in recent years. …