The world economy, like the oceans that encircle the entire planet, is not always equally stable in different countries. While global trends lead to moderate price growth, a real storm is being observed in China, which in a few years of its rampage managed to drown key market players and completely shattered the hopes of investors, if not to make a profit, at least to return the invested funds. Why is the leader of the world economy rapidly losing its positions and how much will it affect the real estate market of Ukraine? Analytical liner from the agency T.H.E. Capital goes to the seas of the PRC to study their pitfalls.
Stability is not always the key to success: the soap bubble and the protracted crisis in China
Bursting bubbles is usually a childlike delight even in reserved adults, but not when it comes to real estate. In this field, this economic term awakens completely opposite emotions. Especially among those who personally had to face him. China experienced firsthand that soap bubbles not only sting the eyes, but also deal irreparable blows to the country's economy.
The protracted crisis began thanks to the COVID-19 pandemic, but it did not go away even with its decline. The real estate sector suffered the most, which was a "blow below the belt" for the entire economy, because until recently it accounted for about 30% of China's GDP. Not only the "crowned" virus, but also local authorities helped the real estate market slowly and surely descend to its current state. Its regulation, too strict by the standards of better times, has made life difficult for many developers since 2020. The so-called law of "three red lines" literally crossed out established processes. More than 30 of the country's largest construction companies, led by China Evergrande Group, have defaulted on their international debts. An equally sad fate befell Country Garden Holdings. The largest real estate operator China Vanke generally faced the fact that in October 2023 the company's corporate bonds lost two-thirds of their former value.
The collapse of the leaders of the region affected the public's faith in its reliability, therefore, along with the fall of the construction giants, there was also a sharp drop in demand for their projects. A decrease in demand inevitably leads to a decrease in prices:
- -0,3% on the primary market (a record since October 2022)
- -0,48% on the secondary market (record paces, the likes of which have not been observed since 2014)
A comparison of 2021 and 2022 shows that already then, investments and the state's faith in the real estate sector have significantly decreased:
- investment in the development of national real estate → -10%
- investment in housing → -9,5%
The area of residential construction for the period from 2021 to 2022 also underwent changes that eloquently demonstrate the decline of the market:
- area of residential buildings → -7,3%
- area of residential buildings put into operation → -15%
The total profit of China's largest construction companies fell by 90%. The authorities took a number of measures in an attempt to correct the situation. Among them were the relaxation of some restrictions on the purchase of real estate, as well as the reduction of mortgage rates. There are no noticeable changes - a large part of the new buildings remains neglected, many of the objects under construction are at risk of remaining unfinished or turning into long-term constructions, and already completed or frozen projects are either idle, or are destroyed by their creators because of their needlessness.
More than 20 million residential units remain at the semi-ready stage, which is especially "delighting" for investors who invested their savings in promising projects even before the beginning of the crisis. Their dreams of a home are in limbo. There is no end in sight to the three-year crisis, which is why some hardened Chinese have inhabited the "skeletons" of new buildings. They have only two possible outcomes: the developers will still be able to breathe life into their forgotten projects, or the concrete walls have already humbly accepted their fate and are only getting closer to inevitable destruction every day. The largest number of such inhabited houses is in Shaanxi province in the central part of China. For example, the residents of Gaotie Wellness City illuminate the premises with the help of lamps powered by solar batteries, and cook on a common gas burner in a makeshift kitchen. too radical methods for forming the declared friendly community.
Blooming and smelling: the situation in the real estate market of Ukraine
It seems that for the first time we can not envy the Chinese economy, but sincerely sympathize. Of course, the same pandemic and temporary "disagreements" with stubborn neighbors affected the general situation in the country and individual segments, but even they are not able to break Ukrainian tenacity and zeal with which we are developing.
2022 the year began with stagnation. For objective reasons, not only the real estate market, but also the entire state was forced to "pause" and shifted the vector of its attention from the economy to the frontline zones and the fight against the usurper. Such events completely discouraged the desire to invest in a house that could be destroyed even before that. , as the curls of the signature will appear in the contract. The year 2023 burst into sad statistics with a gradual increase in demand and cost, not only rented apartments, but also other real estate put up for sale.
Constant monitoring of the market situation and analysis of its trends allow us to look into the future - 2024 the year promises to bring even more profitable deals with attractive objects. Despite the external circumstances, primary real estate and new buildings not only do not experience the difficulties characteristic of their Chinese counterparts, but are also experiencing a period of rapid development. More than 70% of construction sites have resumed their work, and many projects are preparing to welcome their first residents soon.
The Ukrainian real estate market is distinguished by its reliability. He has already proven that he is able to persevere even in the most difficult times. Our experts believe that a modern investor cannot find a better way to increase his capital than to invest it in a promising project. You can pick up this project with the help of the constant leader of the region - THE Capital.
