The coronavirus outbreak is delivering a painful blow to China’s $43tn property market as developers close sales centres and potential homebuyers delay the search for new flats. The impact of the crisis on China’s property market, which some estimate makes up 25 per cent of gross domestic product, is threatening to weigh down the country’s economic growth to 4 per cent in the first quarter, according to several analysts. That would bring the growth rate close to the full-year low of 3.9 per cent experienced in 1990, in the wake of the Tiananmen Square massacre.
“After four years of upcycle, the property sector was already at a turning point even before coronavirus hit,” said Larry Hu, head of China economics at Macquarie Capital. “Therefore, the risk is high for the property sector, which is the single most important part of the Chinese economy.” The outbreak, which has claimed more than 500 lives and infected more than 28,000 people, originated in the central Chinese city of Wuhan. More than 40m people have been put under official quarantine, mainly in the city’s surrounding province of Hubei. The crisis has resulted in a closure of roads and other forms of transport across the country.
As early as January 26, soon after the first quarantines and shutdowns began, provinces such as Guangxi in southern China were postponing the sale of new homes. Many potential homebuyers have been prevented from going outside and viewing new homes or are too frightened to do so, according to real estate agents. “Peoplewith money are scared to death and don’t dare run around outside,” said Tina Yu, a Beijing-based real estate agent. “No one is going to work. The real estate developments are all locked up … the impact will certainly be big.”
Employees in Beijing can officially return to work on February 10, but Ms Yu said there was no guarantee that property projects would allow people in by then. If the outbreak intensifies, potential homebuyers will probably stay inside for longer.