Crisis-hit city shows just how cruel China’s real estate boom can be – with the potential to take a toll on the entire economy | world news

Many people have struck a deal with a developer to trade their land for new high-rise homes – but eight years later, with their old properties long gone, they’re still waiting.

From Helen-Ann Smith, Asia Correspondent @HelenAnnSmith0

Saturday 4 March 2023 01:07 UK

Driving through the city of Zhengzhou, you see signs of a crisis everywhere.

Block by block, shell by shell of unfinished developments.

This city is the worst hit place in a country with a major housing emergency. It has the potential to bring the entire economy to its knees.

The village of Da Wang Zhuang on the outskirts of the city is something of a case study in just how cruel China’s housing boom can be.

Not long ago it was almost entirely farmland and home to around 200 households.

But many people here have made a deal with a developer – their land in exchange for new homes in the high rises that would stand where their farms once were.

They were told it would take three years to build, but eight years later, their old homes long gone, they’re still waiting.

In the shadow of the unfinished blocks is a modest complex of temporary housing.

Here the elderly and needy can live while they wait, but the younger and abler have to rent elsewhere.

At this site we meet Wang Fong and her mother.

Picture:
Helen-Ann Smith speaks to single mother Wang Fong (right) and her mother (center)

“We have no idea how many years we have to wait”

The space they have here is small, there is only room for the two grandparents and occasionally one of Wang Fong’s sons.

It’s got mold all over the walls, it’s got rats, she says, and it’s significantly worse than what they gave up.

“It’s too small,” she says.

“It would have been better to stay at home with us.

“Places like ours, the further you develop them, the poorer they are.”

Adding to her difficulties was losing her job during the pandemic and being widowed three years ago.

She is a single mother struggling to find a job now having to take care of her children and her sick parents.

Picture:
The single mother lost her job during the pandemic and was widowed three years ago

“We have no idea how many years we have to wait,” she says.

“We just have to wait patiently. The developer has no money, the house cannot be built.

“Of course I’m worried. If you rent a room, you have to pay the rent, don’t you?”

broken lives

Outside the village, there are remnants of people’s destroyed lives everywhere.

Construction of a main road has begun, which now ends literally halfway through the former village.

Nobody cleared the huge rubble around him.

But cases like this are far from isolated China.

Picture:
Construction workers in Zhengzhou

For years, developers have gone above and beyond to satisfy a seemingly insatiable appetite.

In fact, the housing industry accounts for one-fifth of China’s GDP — it’s believed to be a huge driver of the country’s astronomical growth.

But given the Zero COVID measuresa loss of confidence and tightened government restrictions, many of these developers were on the brink of collapse and defaulting on that debt.

The industry had its worst year in recent memory, with sales plummeting and home prices falling for 16 months straight through December.

This meant construction was halted across the county, leaving buyers in limbo.

Picture:
An aerial photo shows a building under construction in the city of Zhengzhou earlier this month. Image: `

There is no other place than unfinished, unsafe houses

Some were already paying mortgages on the unfinished homes, and many took to the streets to withhold payments in protest.

Others, with nowhere to go, moved into unfinished, unsafe blocks.

The government responded with a package of stimulus measures and easing, the focus should be on resuming deadlocked developments.

But while this meant some construction resumed, others appear not to have.

In some places, it’s believed that the developers are only sending a handful of workers to keep the appearance that construction is continuing.

Continue reading:

China unveils 12-point peace plan to resolve Ukraine war
US warns China’s ‘spy balloon incident’ ‘must never happen again’
US Secretary of State cancels visit to China over espionage dispute

In Da Wang Zhuang, we met an old lady who thinks like this.

Despite being 68, she’s not eligible for a home in the nursing home and now pays the rent for her family of seven — an openness she didn’t have before her home was demolished.

Now she has to collect garbage to make ends meet.

“You have to earn some money, my grandchildren have to eat,” she says.

“How come it (the high-rise) just isn’t finished? Six or seven people renting a house is a big expense. There’s no transitional allowance, no housing allowance, nothing!”

This is a restricted version of the story, so unfortunately this content is not available.

Open the full version

Picture:
An aerial view of Zhengzhou. Image: `

Extremely vulnerable market – but people are still investing

But despite everything that has happened, people are still investing; here is the obsession with property.

Just around the corner we spoke to a guy who works for another developer and is building another block. He insisted that people should have confidence in the market.

“I’m not worried, it’s ok,” he says.

“Developers’ problems stemmed from the tightening funding environment, but the funding environment has eased since early last year.

“Furthermore, the Government now attaches great importance to the work to ensure the timely delivery of pre-sold homes.

“Fund regulation is tighter than before. We feel safer than before.”

This is a restricted version of the story, so unfortunately this content is not available.

Open the full version

Click here to subscribe to Sky News Daily, wherever you get your podcasts

Restart the economy after the devastation Zero COVID-19 rules is arguably the single biggest task facing leaders of China’s ruling Communist Party — and there’s work to be done Xi Jinping begins a third unprecedented tenure as an executive.

But the housing market could well be one of the biggest obstacles to that.

The problem is that while the stimulus packages might ease some pain in the near term, they don’t solve the underlying problem: a significant housing bubble and a market that’s very boom-bust-prone.

There is still a deep systemic problem here, and it is the people who are paying for it.