over 1 year ago • 1 min
China depends on real estate: the sector accounts for about 20% of its economy, and about 70% of the country’s household wealth is tied up with it. So the possibility of a slowdown in the space is a big deal, and it’s exactly what China is confronted with now: huge developers are in trouble, homeowners are boycotting their mortgage payments, and as you can see above, home prices are tumbling all over the country.
The latter is the last thing the sector needs right now: steadily rising home prices keep the country’s middle-class happy, which is essential for the government to implement various economic and social programs. But falling prices could lead to social unrest in the country, which could drive a vicious cycle of slower growth, lower home prices, and more discontent.
This could be the straw that breaks the camel’s back, which is a worry even if you live outside China’s borders. Real estate is by far the biggest asset class in the world, and China is the world’s second-biggest economy. So if the government isn’t able to contain a slowdown in the sector, it could easily spill out to other regions. And since that would have a significant impact on global economic growth in the next few months, you’ll want to make sure Chinese real estate is very much on your radar at all times.
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