(Bloomberg) -- At least 48 million homes in China have been sold before construction has been completed, suggesting the country’s property crisis won’t be resolved anytime soon, according to a report from Bloomberg Intelligence.
The figure, based on pre-sales data from 2015 through the first half of this year, is bigger than Germany’s total housing stock in 2021. It presents a direct threat to developers’ revenue because people could start avoiding pre-sales of new developments and instead buy completed or second-hand housing, analysts Kristy Hung and Monica Si wrote.
China’s property sector is facing multiple headwinds. Developers are suffering from liquidity shortage, despite the country’s rescue package that included a 300 billion yuan ($42 billion) relending program. New home residential sales slumped further in July by 19.7%.
Adding to the challenges, the country’s aging demographic means a shortage of construction workers. Migrant labour’s average age rose to 43 in 2023 from 38 in 2014, with those above 50 jumping to 31% from 17%.
Younger workers below 30 have declined to 17% from 34%, partly due to the pay that’s less than the country’s average wage. There’s a correlation between annual home completions and the number of construction workers, which hit its peak of 61 million in 2014 and has declined by 25% since, according to the Bloomberg Intelligence report.
Home completion was short by 8.4 billion square meters (90 billion square feet) for sales made from 2000 through the first half of this year, about 38% of the cumulative total, the analysts said. The non-completion ratio soared from an average of 17% of annual sales before 2015 to 47% in 2015-23.
WATCH: Inside China’s Property Crisis
China is seeing a fundamental shift in buyer preference, with existing-home sales overtaking new homes by area for the first time ever last year. Completed homes accounted for 27% of new sales in the first half, compared with 10% for all of 2021, according to the report.
(Updates with more details about China’s property challenges)
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