By Liangping Gao and Marius Zaharia
BEIJING/HONG KONG (Reuters) – Amy Wang was counting on a 100,000 yuan ($13,800) subsidy promised by authorities in the eastern Chinese city of Weifang to help furnish and furnish an apartment she bought two years ago. She is still waiting for the money and has yet to move.
The 30-year-old now pays 6,000 yuan of her 8,000 monthly salary on the mortgage for the 1.1 million yuan apartment and another 1,800 yuan to rent another apartment, relying on her parents for other basic expenses.
“I feel under a lot of pressure,” said Wang, who works in the electronics industry, and bought the bare shell of her apartment, without floors, interior walls or other amenities – which is common in China.
Weifang, with more than nine million residents and an economy bigger than Croatia’s, and dozens of other Chinese cities have promised homebuyers subsidies and other incentives to prop up the ailing real estate sector.
But the real estate crisis is also impacting cities’ ability to lease land to developers, an important source of revenue.
This meant that some local authorities were unable to raise funds to pay for promised subsidies, frustrating buyers and raising doubts about future support measures.
All this could delay the recovery of the real estate market.
“There is a risk that households will see local governments as too cash-strapped to deliver on their subsidy promises,” said Christopher Beddor, deputy China research director at Gavekal Dragonomics.
“That will definitely have an impact on home buying decisions.”
About 150 people from more than 50 Chinese cities, including Zibo in the east, central Shangqiu and Zigong in the southwest, have used a public comment section on the website of People’s Daily, the official newspaper of the Communist Party, to complain about unpaid subsidies in the past six months.
Authorities in many of the cities have responded to the same platform, requiring users to register with their identification document before posting.
Weifang officials, who had promised subsidies of 30,000 to 300,000 yuan, along with tax rebates and other incentives, wrote on several occasions blaming COVID-19, the economic downturn and tax cuts for the failure to make the payments.
“Unusual short-term conflicts between budget revenues and expenditures and enormous pressure on local financial security resulted in delays in the disbursement of housing subsidies,” the finance department of Zhucheng, a municipality governed by Weifang, wrote in January.
In March, the human resources department of Weifang High-Tech Industrial Development Zone said their district had “partially disbursed” the subsidies and more payments were being processed.
Zigong and Zibo officials gave similar responses to Zhucheng in April. Also this month, Shangqiu pleaded for “patience,” saying the subsidies would be provided “when they are ready.”
None of the city authorities responded to Reuters’ requests for comment.
The real estate market at its peak accounted for about a quarter of China’s economic activity, and budget revenues from land auctions were dwarfed in many cities before the pandemic.
Across China, land auction revenues in 2023 were about 20% below pre-pandemic levels in 2019, official data showed. In Zibo, Shangqiu and Weifang, off-budget revenues (including land sales) fell by 30% to 50% over the same period.
“What is underappreciated in the Chinese real estate market downturn is that the real impact is on local governments,” said Logan Wright, partner at research firm Rhodium Group.
The amounts and total number of people affected by unpaid subsidies remain unclear.
Shangqiu official Alan Liu, 30, said some homebuyers in the city have received their subsidies, but he is still waiting for the promised 30,000 yuan after purchasing an apartment in a “prime location” in June 2022.
“It is crucial that relevant departments realize that this issue cannot be ignored for long and must be resolved, otherwise it will affect the government’s credibility,” Liu said.
($1 = 7.2464 Chinese Yuan)
(Editing by Sam Holmes)
