Young people in China are becoming more cautious about buying houses against the backdrop of a sharp economic slowdown in the country. This poses a challenge for policymakers as the government is looking to boost the property market.

Volar Yip, 32 years old, owns a media studio in Foshan, Guangdong province. He said that he has dreamed of buying a house in Foshan. But after two years of searching, he now decides to give up his dream temporarily.

He told Reuters that many of his clients are currently cutting advertising budgets, including government departments. And although banks are lowering the interest rates, all the news about China’s economy, housing market and Covid epidemic situation is not positive.

A 30-year-old woman wants to buy a house in Hangzhou. She said that there is a chance of buying a house at lower prices, but she still wants to wait until the economy improves, because the job outlook is her biggest concern right now.

She said that even the tech giant Alibaba is laying off, so she is worried she won’t be able to make enough money to pay off loans.

According to China Watch, the real estate market accounts for 1/4 of China’s gross domestic product. But this sector has become shaky due to huge debt.

Meanwhile, manufacturing and retail sectors have had negative impacts from the country’s insistence on a zero-Covid strategy.

Hoping to re-stimulate the housing market, China has relaxed policies in the real estate industry. But the transaction volume in the market plunged 47% in April compared with the same period last year, the largest decline since 2006.

Land revenue also drops 38% year-on-year in April, the largest decrease in over six and a half years.

China’s property market has been expected to bottom out in the second quarter of this year. However, after a slump in the first five months, developers have lowered their sales forecasts for this year, as there is no sign of a rebound in demand anytime soon.

Data from the People’s Bank of China showed that loans to Chinese households, including mortgages, fell by 32 billion dollars in April, compared with an increase of about 80 billion dollars a year earlier.

In May, the People’s Bank of China announced a larger-than-expected cut in the mortgage interest rate for first-time homebuyers. The buyers now can borrow money at an interest rate of 4.4% instead of 4.6% as before.

The purpose of the policy is to re-stimulate the enthusiasm of consumers to buy houses, and to revive the gloomy housing market and boost the ailing economy.

But a senior executive at a major bank said that, for now, it has not seen a big uptick in mortgage applications.

The market is still stuck in a debt crisis. Many developers are struggling to repay their debts to suppliers and creditors, but a sluggish home sales market means developers have less cash on hand. That will further affect local governments’ earnings from land sales.

Concerns about a sluggish real estate sector, coupled with China’s insistence on a zero-Covid policy, and stagnant growth in the construction industry, have cast doubt on whether China can achieve its economic growth target of 5.5% this year.

Lu Ting, chief economist of Nomura China, said that this wave of Covid epidemic forced more than 40 cities to adopt strict lockdown measures. The lockdowns have greatly restricted the mobility, employment, income and confidence of Chinese families. And most college graduates may not be able to find work.

Official data showed that China’s unemployment rate climbed to 6.1% in April, the highest since February 2020, and well above the government’s target of less than 5.5%.

Unemployment among 16- to 24-year-olds hit a record 18.2% in April.

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