Financial expert analyzes: China's real estate sector as a brake on growth - a look at the economic effects and solution strategies.

Financial expert analyzes: China's real estate sector as a brake on growth - a look at the economic effects and solution strategies.

According to a report by finanzmarktwelt.de, the real estate sector in China has developed from a growth engine to a growth brake. The latest figures show that value added fell by 51 billion yuan in the first three quarters. The sector's interconnectedness with more than 60 other industries increases the impact on the entire Chinese economy. Local governments are suffering from falling revenue from land sales, and real estate bonds in China are all but dead. Prices for existing homes have fallen 8% since the July 2021 peak, and brokers in Beijing and other major cities are aggressively cutting prices. This has a massive impact on the real estate market and the entire economy in China.

As a result of the collapse in the real estate sector, local governments have received less income from land sales. Government revenue from land and real estate business fell by 3.1 trillion yuan, creating liquidity problems for developers.

The forecasts show that sales in China's real estate sector could fall to around 10 trillion yuan in the negative scenario, which would send sector activity back to 2015 levels. This would have a massive impact on the entire economy in China.

The massive losses in the real estate industry are leading to a reduction in household consumption of at least 430 billion yuan, which in turn further weighs on the economy. The immense financial challenges require a profound overhaul of financial structures in order to find sustainable solutions for the stability of the real estate market in China.

The recent protests in China related to real estate have shown that the middle class, which is extremely important politically, is also suffering from the effects of the real estate collapse. The Chinese government faces a major challenge in restoring public confidence and finding a sustainable solution to the real estate crisis.

Overall, the real estate crisis in China has become one of the most pressing problems and requires comprehensive government action to prevent the situation from worsening further and to ensure the country's economic stability.