Commentary on Political Economy

Monday 27 November 2023


Property woes leave a trail of loss and stress across China

Investors, buyers and families count cost of real estate behemoth’s failure


A swath of unfinished apartment blocks across China, indebted buyers uncertain if they will ever move into their new homes and anger at the loss of their deposits — the impact of China’s property crisis has been immense.

The 2021 default of Evergrande, the world’s most indebted developer, and dozens of its peers ushered in a new era for China’s property sector.

Evergrande, which faces the threat of liquidation, embodies the turmoil of a sector that accounts for roughly a quarter of China’s economic activity and is the most important component of household wealth.

Residential property prices were up almost a third in the first quarter of this year compared with a decade ago, according to data compiled by the Bank for International Settlements, but fell 5 per cent between the third quarter of 2021 and the first quarter of this year.

Developers, whose fortunes are intertwined with the local governments that sell them land and the investors who back them, have struggled to recover amid a wider lack of confidence. Four people who invested in property tell of their experiences:


Zhang, 42, a make-up artist from the city of Hefei, had hoped to move into her new flat with her elderly parents in August. But two years after she paid a deposit for a 667 sq ft flat costing Rmb580,000 ($80,000) it is still not finished and she has not been able to get her deposit back from Evergrande.

“I emptied my savings to cover the deposit and downpayment of a total of Rmb350,000” for the flat, she said. “I don’t dare tell my parents the news. If I did, they would be worried sick.”

Zhang, who did not want her full name to be published, works in nail art, wedding make-up and theatres to meet the mortgage on her current apartment. She now regrets not taking rumours of Evergrande’s troubles seriously. “How can the [government] allow it to collapse? How can this happen?” she said.

“I paid my part, and [Evergrande] is not delivering,” she said. “How can I not be emotional? I can’t sleep at night. I have lost my hair. I can’t even take a proper break.”

She is not alone. About a quarter of the roughly 200 flats in the project have been sold. Local authorities told her that buyers had remitted about Rmb27mn to Evergrande for that site alone.

Evergrande did not respond to requests for comment.

In recent weeks, Zhang and other buyers have protested at local government offices and Evergrande’s sales offices, including a sit-in outside the district office. Armed police showed up and made them leave, she said.

Later, she received phone calls from officials telling her not to organise any more protests. “I didn’t get what I paid for. And they [government officials] told me to bottle up my emotions,” said Zhang. “Couldn’t I cry a little about the grievance I have?”


Like many young people, Summer Wang aspired to own her own place and get married. Soon after she graduated from university in Shanghai in 2008 she managed to do both. Her in-laws helped with the 30 per cent deposit for the Rmb600,000 apartment for her and her husband. In 2013 she bought a larger flat for her parents. In 2021 she sold the first flat for Rmb3.5mn and the second for an undisclosed sum.

But Shanghai’s overhaul in 2021 of rules governing house purchases — part of Beijing’s push to curb leverage and prices in the wake of Evergrande’s collapse — has made it more difficult to buy new apartments.

Potential buyers must enter a lottery to win the right to buy new property. Those who do not have a house are prioritised. After seven attempts Wang secured a lottery spot at the end of last year, buying a new property at the beginning of 2023.

Last month she completed the purchase of a used property — buyers typically prefer new builds — for Rmb2.9mn. She bought this property for her parents.

The crisis means not everyone can buy a property before they marry. Many are “waiting for prices to go down a bit more” before they buy, Wang said. “Some sellers also think that if they wait a little longer then the government may roll out more policies so that they can sell at a higher price. That’s what I see now, sellers and buyers are hesitating.”


Gary Lai, a chef who runs a Michelinrecommended noodle soup restaurant in Hong Kong, is still waiting for the roughly 1,000 sq ft apartment he bought in Zhaoqing two years ago for Rmb1.1mn to be finished.

But given it was developed by stateowned Overseas Chinese Town Enterprises, he is optimistic it will be ready next year and is bullish on the market.

Lai, who is in his 50s, plans to move to the city of Zhaoqing when he retires. He is even considering buying a second flat in the city to provide him with steady rental income in retirement.

“China’s development is rapid and is a pioneer in many sectors,” he said. “I imagine living in mainland China would be satisfying . . . especially given the lower cost of living there.”

Since Lai has no plans to sell the property, falling prices do not alarm him. A weaker renminbi and Chinese interest rate cuts make property in the mainland attractive for Hongkongers, he added. “This might be the best time to buy newly completed properties.”


Emily, a business owner in her 30s who lives in Shanghai, could not afford to buy a flat in China’s most populous city. Instead, as with many others, she and her British husband opted to buy in Shangrao, her home town.

In 2021, she paid Rmb620,000 for an Evergrande apartment. The price was discounted because she paid in cash and because the flat was on the 14th floor, a number deemed unlucky in China because “four” and “death” are homophones.

When the company’s severe liquidity problems began to mount later that year she said buyers in a 500-person WeChat group were quick to petition the local government. Her father joined others to appeal to local politicians about the development.

Since then, she said, the project has been supported by the local government, according to an Evergrande representative in the WeChat group, and her apartment is expected to be completed within a year.

“Most people who bought [there], they probably only have Rmb1mn and spent all their money on it,” said Emily, who did not want her full name to be published.

She is in the process of buying a second property in the city, an apartment on the market for Rmb1.3mn, a 30 per cent discount on the previous asking price.

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