1 of 1 Evergrande’s bankruptcy has exposed China’s real estate crisis Photo: Getty Images via BBC Evergrande’s bankruptcy has exposed China’s real estate crisis Photo: Getty Images via BBC
“When I think about it, I cry,” Ms. Guo says of an apartment she bought. “It’s difficult. My son and I feel sorry.”
In 2021, just months before giant Chinese real estate group Evergrande showed the first signs of crisis, Guo Tianran (whose name has been changed at her request) and her husband bought an offplan apartment for their only son.
The couple, almost 60 years old, saved up to pay the US$30,000 (R150,000) deposit for the apartment, which was to be built by the country’s leading real estate company at the time. They also planned to use 75% of their income to pay off the mortgage. The original forecast was that they would receive the keys in December this year but they are still a long way from that.
“We wanted to help our son and provide him with a safe haven where he can start his life when he graduates from college,” Guo told the BBC.
But a few months after the purchase, the scenario changed.
Construction has stopped in Henan, the central Chinese province where the couple purchased the property.
“We saw the main building being built and suddenly heard that Evergrande was collapsing. Then construction stopped last year.”
As of September 2021, Evergrande has been unable to repay more than $100 million to offshore creditors. At the time, it was estimated that the company had more than 1.5 million unfinished properties.
These alarming situations brought to light a real estate crisis in China that is still ongoing two years later. The bankrupt company has been trying to reach a turnaround agreement for the past 18 months, but concerns about its future were renewed this week when it emerged that its founder Hui Ka Yan and other senior executives had been arrested by police.
“I used some of my retirement money to pay the down payment. We will pay the mortgage for the next 30 years,” says Guo.
As the real estate crisis in China worsens, so do fears. “We don’t want to be left with nothing,” he says.
This is a fear shared by many people who have invested their savings in a new property: that their dreams have been shattered forever.
What adds to the concern is that Evergrande is not the only real estate company in serious trouble.
Another giant, Country Garden, reported a record halfyear loss of $6.7 billion. Analysts estimate that this developer has sold a million properties that are not yet completed.
“I almost bought an apartment from Country Garden,” said Zhang Min, 31, who also lives in Henan.
She and her fiancé planned to buy the property together. Her parents’ home was built by Country Garden and the young couple were told they could buy the property at a discount in August. But when they learned that the company was on the verge of collapse, they changed their minds.
“There is no way we are going to postpone our wedding because we are not buying a new house. I just have to give up the idea of newlyweds living in a new house,” says Zhang.
“My parents’ generation experienced the Chinese real estate market boom for two decades. Nowadays, people around me are worried about falling property prices.”
China’s real estate market accounts for a third of its economy. Therefore, its situation is also causing concern for related industries, from construction materials such as steel and cement to household appliances.
And yet this is yet another crisis for Beijing, which is also struggling with slowing growth, falling exports and a youth unemployment rate of over 20%.
Beijing has tried to ease public concerns. State media said little about Hui being placed under police surveillance, and the Foreign Ministry appeared to block reporters’ questions on the subject at a press conference on Thursday (28/9).
But the news was a hot topic on Chinese social media such as Weibo. There were more than 600 million views on the topic of Hui monitoring alone.
Many on Weibo are complaining about what has allowed Evergrande and other real estate giants to get to this point while inadequately protecting buyers.
“Due to inadequate mechanisms and regulations, it has become almost commonplace for companies to ‘collapse’,” wrote one user.
There are also fears that the real estate crisis will spread to other companies, as Evergrande’s situation has exposed systemic flaws, such as: B. excessive debt and deep discounts to attract buyers, which ultimately drains the company’s coffers.
People have also shared their experiences as disillusioned and worried homebuyers.
In a video on Douyin, the Chinese version of TikTok, a man said he had to work three jobs to pay his mortgage and current rent because he couldn’t move into his unfinished apartment in Evergrande.
When the company’s shortcomings first came to light two years ago, protests broke out outside the company’s offices in Shenzhen, southern China. In recent months these demonstrations have returned.
Guo says that she and other Evergrande buyers are not standing idly by. They formed three groups on the WeChat network, each with nearly 500 members.
“We organized to look for the government. With so many of us, they can’t ignore it,” she said.
She also told the BBC that she had been warned by local authorities not to speak to the media and that she had heard promises that work on the building where her apartment is located would soon resume.
But some members of his group go to the construction site every day and see few workers and minimal progress.
“Some of us have stopped paying our mortgage,” Guo says. “If the bank pushes too hard, it will sleep in the bank’s lobby.”
*With additional reporting from Ian Tang and Kelly Ng in Singapore