Chinese leader Xi Jinping’s aggressive push for multi-storied housing projects has thrown the country’s once booming real estate sector into turmoil. A recent study reveals that China’s middle-class families remain cautious about investing in property.
According to a quarterly survey of household wealth and income conducted by Southwestern University of Finance and Economics in Chengdu, Sichuan province, families’ expected future spending has dropped to levels lower than those seen during the early days of the Covid-19 pandemic. The South China Morning Post reported these findings.
Decline in Spending Expectations
The China Household Wealth Index Survey showed that the index of spending expectations fell to 101.9 in the first quarter of this year, down from 103.0 in the fourth quarter of 2023. The survey measures the spending plans of households with an average of 1.5 million yuan (US$207,000) in combined property and financial assets.
Cautious Approach to Real Estate
Families in the survey expressed particular caution about purchasing real estate. The proportion of households buying new homes dropped to 6.4% in the first quarter of this year from 7.5% in the final quarter of 2023. Only 6.8% of households said they planned to buy property in the next three months, with over 20% adopting a wait-and-watch approach.
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Economic Implications
In the spending index, a reading of 100 marks the dividing line between expansion and contraction in spending plans. China’s economic growth, historically driven by manufacturing, now faces challenges due to the US-China trade war and internal debt. Beijing is shifting focus towards boosting domestic consumption to drive economic expansion. However, with exports under pressure and investment prospects dimming, the path to economic growth appears increasingly uncertain.
GDP Growth and Consumer Sentiment
China’s GDP grew by 5.3% year on year in the first quarter, with domestic consumption contributing 73.7% to economic growth, according to the National Bureau of Statistics. Despite this, the survey revealed that 62.3% of respondents were not optimistic about economic prospects over the next 12 months, a slight improvement from 66.4% three months earlier.
This cautious sentiment among middle-class families highlights the ongoing challenges facing China’s real estate sector and broader economy, as policymakers strive to balance growth and stability amid evolving economic conditions.