The human cost of China’s property crisis

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.

While China’s 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, they 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. The stories of four individuals who invested in the Chinese property market illustrate the wide impact of the crisis.


Zhang, a 42-year-old make-up artist from the city of Hefei in Anhui province, 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.

Hefei skyline
© FT montage/Unsplash

“I emptied my savings to cover the deposit and downpayment of a total of Rmb350,000” for the unfinished 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 three jobs — 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 added. “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 the only one affected — about a quarter of the roughly 200 apartments in the residential project have been sold. Local authorities told her 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 staged protests at local government offices and Evergrande’s sales offices, including a sit-in outside the district government’s office building. 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 Chinese 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 another larger flat for her parents. In 2021, she sold the first flat for Rmb3.5mn and the second for an undisclosed sum.

Residential buildings in Shanghai
© FT montage/Getty

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 second-hand property — seen as less desirable by Chinese buyers who typically want new builds — for Rmb2.9mn. She bought this property for her parents.

The real estate crisis means not everyone will be able to buy a property before they get married. Many are “waiting for the house 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 in the market now, both sellers and buyers are hesitating.”


Gary Lai, a chef who runs a Michelin-recommended 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.

Residential apartment buildings
© FT montage/Unsplash

But given it was developed by state-owned Overseas Chinese Town Enterprises, he is optimistic it will be completed next year and remains bullish on the Chinese market.

Lai, who is in his 50s, plans to move to the city of Zhaoqing in Guangdong province when he retires. He is even considering buying a second flat in the city, hopeful that this will 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 an apartment in China’s most populous city. Instead, as with many others, she and her British husband opted to buy in her hometown: the city of Shangrao in the southern province of Jiangxi.

Rapeseed blossoms in a field with residential buildings under construction in the background in Taihe County, Jiangxi Province
© FT montage/Getty

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.

This article was originally published by a . Read the Original article here. .