Can developers resume unfinished projects amid buyer uncertainty?

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Unfinished Housing Projects Face Hurdles Amidst Buyer Hesitation

The ability of Chinese developers to resume construction on unfinished projects remains uncertain due to persistent buyer hesitancy, despite recent government support measures. While these policies aim to improve liquidity for developers, they do not directly guarantee the resumption of stalled construction, as the fundamental issue of subdued demand persists. Many prospective buyers, like Sam Wang, are adopting a "wait-and-see" approach due to concerns about future income and the broader economic outlook.
Buyer Concerns Over Unfinished Homes

A significant apprehension among some homebuyers is whether the recent supportive measures will empower developers to restart construction on projects that have been halted. This concern is exemplified by the case of Sam Wang's relative, who paid in full for a presale property in Wuhan approximately three years ago, only to find it remains unfinished. This situation highlights a tangible risk for buyers who have already invested substantial amounts without receiving their completed homes.
Demand Recovery Remains a Key Challenge

While the government has introduced a comprehensive package of 16 supportive measures, primarily focused on bolstering developer liquidity, analysts and bankers emphasize that these primarily address supply-side issues. The recovery of demand for property, a sector crucial to China's economy, is still a significant concern. Factors such as falling home prices, rising unemployment, and the lingering effects of protracted Covid-19 curbs have led many potential buyers to postpone their purchasing plans.
Impact of Economic Conditions on Buyer Sentiment

The broader economic environment is directly influencing the sentiment of homebuyers. Protracted Covid-19 curbs, coupled with falling home prices and increasing unemployment, have made prospective buyers hesitant. Many, like engineer Jack Yang, are delaying plans to purchase new homes due to concerns about future income stability and job security. This cautious sentiment is reflected in property sales, which have seen a prolonged decline, with new home prices falling at their fastest pace in over seven years.
Unclear Impact of Support Measures on Credit Risk

Although the recent liquidity-boosting measures are seen as alleviating the vicious cycle between real estate and financial risks for banks, it remains too early to declare an end to credit risks in the real estate sector. Some bankers note that while the financing environment has improved, the uncertain economic outlook continues to pose challenges. Chinese banks have substantial exposure to the property sector, and the downturn is projected to result in significant losses over the coming years, primarily from unsecured property development loans and other assets.

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Can developers resume unfinished projects amid buyer uncertainty?

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