According to a Nomura report, the number of unfinished, pre-sold homes in China stands at approximately 20 million units, a size 20 times larger than that of the property developer Country Garden. Country Garden, previously the largest non-state-owned developer in China by sales, faced financial difficulties this year, leading to a U.S. dollar bond default last month.
Key Points:
Unfinished Homes: Nomura estimates around 20 million units of unconstructed and delayed pre-sold homes in China.
Financial Implications: Completing the remaining units would require about 3.2 trillion yuan ($440 billion).
Government Priority: Ensuring the construction of pre-sold homes is a government priority to maintain buyer confidence.
Social Stability Concerns: Nomura suggests that delays in home delivery could become a social issue and endanger social stability. Beijing may need to increase policy support to address potential challenges.
Policy Support: The report highlights the need for increased policy support to restore confidence in the property sector and the overall economy.
Delivery Delays Impact: Homebuyers might become increasingly impatient, leading to potential social issues if home delivery delays persist.
Property Sector Challenges: China’s property sector has been facing challenges, including a financing crunch for developers and construction difficulties due to Covid-19 restrictions.
Mortgage Non-Payment: Last year, many Chinese homebuyers opted not to pay mortgages on property purchases due to prolonged construction delays.
Developer Financing Crunch: Beijing’s crackdown in 2020 on high debt reliance by developers has contributed to a financing crunch in the sector.
Construction Difficulties: Covid-19 restrictions in 2021 made construction challenging for developers.
Nomura underscores the importance of addressing delayed home deliveries to prevent potential social stability issues, suggesting that robust policy support is crucial for restoring confidence in the property sector and the broader economy.