- Ethan Price
Is China's Housing Bubble About to Burst?
Updated: Oct 5, 2021
By: Ethan Price
October 3rd, 2021
This past month, major Chinese real estate and property company, China Evergrande Group, have missed a scheduled interest payment as the company struggles to stay afloat. Evergrande is currently in the hole $304 billion, with most of the money belonging to the Chinese and US governments, as well as suppliers and contracts. While no one knows exactly what will happen, many speculate that the Chinese government will intervene.
China's housing market has been in a bubble for the better part of 15 years, meaning it is only bound to burst sooner than later. Evergrande has been a main proponent of the industry during this time, but it seems as if the corners they cut are finally coming back to bite them. At the end of last year, Evergrande was juggling 700 projects, "covering 132 million square meters of total floor area. For comparison, the total floor area of the Empire State Building is about 257,000 square meters" (WSJ). While this may seem like a good problem to have, it appears that Evergrande is undermanned and can not finish their projects in time to meet their customers' demands. "As of the middle of this year, the company had presold roughly 1.4 million individual properties worth about $200 billion combined".
As of this past Wednesday, Evergrande has decided to sell most of its stake in a commercial bank to a Chinese state-owned enterprise, suggesting that the government will be attempting to help manage the group's debt crisis.