Research reveals overlooked factor driving China's real estate crisis

The default of Evergrande, one of China's largest developers, set off a chain of defaults among developers, triggering the ongoing property market crisis in China. While analysts frequently attribute the crisis to China's tax system, land finance, state intervention, and various other factors, recent University of Michigan research has revealed an often overlooked aspect-the concentrated nature of the real estate industry. The top five real estate developers in China accounted for 30% of the country's total housing production in 2018, compared to a share of 13% in the U.S. Housing production in the U.S. was only about a quarter of what China has produced in the last decade. The concentration of the real estate sector in China was mostly due to the advantages large developers enjoy, according to the study. The real estate sector contributed around 20% of China's GDP. Large developers often expanded nationally, looking for new development opportunities outside their home cities, especially in regions with lower land costs, leading to housing oversupply in those places. More information: Lan Deng et al, Housing production and the structural transformation of China's real estate development industry, Housing Studies. Citation: Research reveals overlooked factor driving China's real estate crisis retrieved 1 May 2024 from https://phys. org/news/2024-04-reveals-overlooked-factor-china-real.