Chinese Property Developers See Signs of Recovery, But Analysts Warn of Long-Term Slowdown
After a record-breaking slump last year, some Chinese property developers are seeing signs of recovery, thanks to an increase in property prices in major cities. However, analysts warn that the long-term prospects for the sector remain uncertain. The real estate industry grew rapidly following the easing of restrictions in 1998, as buying a home in China is a common prerequisite for marriage and an investment opportunity.
For two decades, developers were able to build quickly, thanks to easy bank loans. But since 2020, access to credit has been slashed, and demand for property has fallen due to the economic downturn and lack of confidence in the market. This was exacerbated by the near-bankruptcy of former industry leader Evergrande, which spread to other developers and resulted in potential buyers shunning the market.
Despite the recent signs of recovery, analysts warn that the decline in China's population, which started in 2022, will continue to weigh on demand for property. The government is also pushing the idea that housing is for living in and "not for speculation," which means that speculative demand may not return. While the property sector accounts for about a quarter of China's GDP and is a significant source of revenue for local authorities, analysts believe that the days of rapid growth in the industry are likely behind us.
