A residential development called Sunshine Peninsula, in Guangzhou, a metropolitan port city on China’s southern coast, is billed as a modern, seaside escape. Ads for the 5,000-apartment complex depict a glitzy waterfront neighborhood with palm-tree–lined boulevards and European-style gardens.
The first phase of the apartments—around 1,300 units—launched in August and sold out almost immediately, according to a sales manager who would give his last name only as Liu. But construction stopped in September as the company behind it, Evergrande, China’s largest and most indebted developer, ran short on funds. This site that’s frozen in time—construction cranes suspended in air, buildings wrapped in scaffolding, plots of brown dirt awaiting plush green sod—captures just how suddenly Chinese consumers realized that the value of real estate, the nation’s favorite means of savings, wasn’t always going to go up.
China is a nation of savers, and real estate is where the country stashes its money. A boom in homeownership over the past two decades has funneled an enormous share of China’s household wealth—70%—into real estate, according to Loomis Sayles. In the U.S., that share is 35%.
Now, Beijing—recognizing China’s dwindling population growth, slowing urbanization, and inflated home prices—is trying to wean the property sector off the debt that fueled its rise and, in turn, reduce the economy’s reliance on the property sector and related industries, the largest contributor to GDP at 30%. The effort is starving developers of funds, leaving projects like Sunshine Peninsula in limbo and adding urgency to Beijing’s campaign to hook citizens on other means of investment, such as its domestic stock market. Home sales and housing prices are starting to tick down after years of spikes—early signs that Chinese citizens may be rethinking the role of their homes as trusty piggy banks.