China’s once booming real estate market, which used to be the locomotive of its economy, is now facing an unprecedented “avalanche.” From millions of properties along the Yongding River in Beijing plummeting to almost nothing, to the alarming sight of vacant homes scattered throughout Wuhan, this real estate collapse has not only swallowed the wealth of countless ordinary families but has also pushed many industry giants into dire straits. With economists warning that “a halved waist is just the beginning,” the domino effect triggered by the real estate bubble is shaking every nerve of China’s economy at an unprecedented speed.
Financial blogger “Anxious Cola Cake” recently visited the “Rhine Valley” community along the Yongding River in Beijing and revealed the jaw-dropping state of crashing property prices. He discovered that due to the location of the Rhine Valley community by the Yongding River in Beijing, renting a property there is very cheap, with monthly rents of less than a thousand yuan. He decided to temporarily rent a unit in the area.
He documented his visit to the Rhine Valley community and shared that despite its prime location, property prices had fallen drastically. Some owners who bought properties for over 1.8 million yuan saw prices drop by 1 million yuan recently, and now by 1.3 million yuan. Properties bought for 1.8 million yuan are now worth only 700,000 to 800,000 yuan. This means that these high-priced properties have seen a roughly 70% drop in value, causing substantial losses for many property owners. The blogger emphasized that the price drops are almost universal in the surrounding areas.
The real estate data confirms the dire situation. The “Peacock City Rhine Valley” in Yongding River on Fang Tianxia website shows an average price of 8,221 yuan per square meter, in continuous decline. Similarly, the “Peacock City Cambridge County” in Yongding River had an average resale price of around 6,547 yuan per square meter in July. Data indicates that properties in “Yongding River” that once sold for as high as 15,000 or even 20,000 yuan per square meter have now plummeted to only a few thousand per square meter, with million-yuan price drops becoming the norm.
Websites like Fang Tianxia display the property prices for the “Peacock City Rhine Valley” at 8,221 yuan per square meter, showing a continuous downward trend. Similar trends of price drops are observed in some areas of the Peacock City series on platforms like 58.com.
The devastating collapse of property prices is not limited to the Beijing area. A Wuhan self-media blogger, as a “full-payment property acquirer,” recently visited several communities in Wuhan and captured the heart-wrenching scenes of widespread vacant properties. She noted that in many communities, the lack of lights in buildings signifies numerous vacant homes, with unlit ones indicating they are unoccupied and empty.
She remarked, “I’m not an economist, but I understand the basic principle that scarcity determines value. Now, there are empty houses everywhere, supply exceeds demand. Why shouldn’t prices drop?” Expressing a pessimistic outlook on the future trends of property prices in Wuhan, she predicted, “It will only get worse. Halving is just the beginning, and the road to digesting the bubble is still long.” Many desperate landlords facing continuous price drops are selling properties, once valued at 1.08 million yuan, now for as low as 300,000 yuan. This unprecedented situation has turned the Wuhan property market collapse from a symbol of wealth into a nightmare for property owners.
As the real estate market crumbles, the “domino effect” is spreading to related industries, leading to a series of tragedies. Recently, several business tycoons closely tied to the real estate sector have met untimely deaths:
July 27: Wang Linpeng, 57, Chairman of leading home furnishing company “Juran Home,” jumped to his death.
July 17: Renowned figure in Guangzhou home decoration industry, Zeng Yuzhou, known as “Decoration Master,” committed suicide by jumping off a building.
July 3: Shen Kangming, director of Zhejiang Construction Investment, died after jumping from a building.
June 2: Liu Wenchao, Chairman of Xizi Elevator, committed suicide by jumping off a building at the age of 54.
Financial blogger “Tom” mentioned that these individuals who took their lives were closely connected to the real estate industry through their businesses. Industries such as elevator manufacturing, home furnishing, and urban investment companies are intrinsically linked to the real estate sector. These magnates, once influential in their fields, are now facing the harsh realities and hidden secrets brought to light by the real estate crash.
“Tom” cautioned, “If we regard 2021 as the year of the real estate explosion, today, four years later, a series of catastrophic events in related industries are unfolding. However, this is just the beginning, and more industries are likely to implode.” He predicted that industries closely tied to real estate, such as lighting, electrical appliances, glass, and wood, will face insurmountable debts and may follow the path of these fallen giants.
In a circulating speech from May this year, Chinese economist Xiang Songzuo’s foresight and reflections on the current real estate crisis have sparked contemplation. Xiang, expressing regret as an economist, recalled his warnings about the real estate sector during his time as Chief Economist at Agricultural Bank from 2011 to 2012. He vividly remembered the “crazy lending” by Chinese commercial banks to the real estate sector in 2012. During a meeting with over 30 bank chairpersons, the Deputy Governor of the People’s Bank of China candidly stated, “What you chairpersons are doing today may seem correct on the surface, but I tell you, in the future, you will realize that what you are doing now is madness.”
Xiang highlighted that during the peak of the real estate boom, 42% of China’s total social financing flowed into the industry, an unsustainable situation. He solemnly stated that everything has been exhausted. Real estate has now become the “biggest burden on the entire Chinese economy,” leading to massive debts for local governments, households, and banks accumulating enormous non-performing loans.
Regarding when property prices may stabilize, Xiang predicted that the central government’s call for “stabilization and recovery” might take “at least three years, possibly five.” He admitted, “In the past, I was hesitant to say that we made a serious mistake, as I was not qualified to do so. But today, we must bear this cost.” He noted that the peak market value of Chinese real estate was once claimed to exceed 40 trillion yuan, with some even suggesting it reached 50 trillion yuan. He warned, “This will drop by half. So, what kind of situation will the Chinese economy face? We are very anxious right now…”
All indications point to the deep-rooted crisis in the Chinese real estate market and the massive impact it is having on the overall economy, society, and people’s livelihoods, which may just be the beginning.