Grow Investment says it could take a decade to overhaul China’s real estate sector

China’s urbanization drive may be coming to an end – and this could cause further damage to the already struggling real estate sector, according to Chinese economist Hao Hong.

“Reforming the real estate sector may be several years or even a decade’s work ahead of us. The reason is that we have built too much housing for Chinese people,” said Grow Investment’s chief economist.

“China’s urbanization process, which has been advancing very rapidly in the past 10 years, has also come to a halt,” Hong added.

China’s real estate market has suffered from a decline in consumer confidence, with real estate giants Evergrande and Country Garden mired in debt problems.

Evergrande, which defaulted on its debt in 2021 after a liquidity crisis, announced on Friday that it would postpone a debt restructuring meeting that was scheduled for Monday. Country Garden also swings by default.

Hong noted that Chinese real estate worth 18 trillion yuan ($2.46 trillion) was sold two years ago. Managing 10 trillion this year, or five to six trillion yuan worth of sales in the future, would be considered “lucky,” he said.

New home prices in China in August fell by 0.3% month-on-month, continuing the decline in the real estate market. The figure also represents a 0.1% decrease compared to last year.

Only during weekends, a Former Chinese official He warned that China’s population of 1.4 billion people would not be able to fill unoccupied apartments across the country.

“There is now an oversupply of properties… 1.4 billion people may not be able to live in them,” said He Qing, former deputy head of the Chinese Bureau of Statistics. He was speaking at a conference, according to Local media reports.

China’s post-Covid-19 economic recovery story has been disappointing, although August retail sales and industrial production data accelerated with better-than-expected growth.

“Once people reset their expectations, so does the economy [restructures] “If we can bring back growth from other industries instead of relying mostly on the real estate sector for growth, we will actually have a better and healthier Chinese economy than before,” Hong said.

“Not having an overbearing Chinese real estate sector is actually a good thing for the Chinese economy in the future.”