An aerial view of a newly built property in Hangzhou, Zhejiang Province, China, on December 15, 2023. .
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Amy Wang is counting on a promise of 100,000 yuan ($13,800) in subsidies from authorities in the eastern Chinese city of Weifang to renovate an apartment she bought two years ago. She’s still waiting for money and hasn’t moved in yet.
The 30-year-old now spends 6,000 yuan of her monthly salary of 8,000 yuan to pay the mortgage of her 1.1 million yuan apartment, and another 1,800 yuan to rent another apartment. She relies on her parents for other basic expenses.
“I feel a lot of pressure,” said Wang, who works in electronics manufacturing and bought a bare-bones apartment without floors, interior walls or other fittings – a common practice in China.
Weifang, which has a population of more than 9 million and an economy larger than Croatia’s, and dozens of other Chinese cities have pledged to provide subsidies and other incentives to homebuyers to shore up the struggling real estate sector.
But the real estate downturn has also affected the city’s ability to lease land to developers, a major source of revenue.
That means some local governments are unable to raise funds to pay promised subsidies, frustrating buyers and casting doubt on future support measures.
All of this could delay the housing market’s recovery.
“Households may start to think that local governments are too strapped for cash and cannot deliver on their subsidy promises,” said Christopher Bedol, associate director of China research at Longtime News.
“This will definitely have an impact on home buying decisions.”
About 150 people from more than 50 cities including Zibo in the east, Shangqiu in the center, and Zigong in the southwest complained about unpaid subsidies in the past six months through the public comment section of the website of the People’s Daily, the official newspaper of the Communist Party of China.
Relevant departments in many cities responded on the same platform, requiring users to register with their identity documents before issuing documents.
Weifang city officials had promised subsidies of 30,000 yuan to 300,000 yuan, as well as tax rebates and other incentives, but city officials have repeatedly written articles blaming COVID-19, the economic downturn and tax cuts for the unpaid payments.
“Extraordinary short-term conflicts have arisen between fiscal revenue and expenditure, and local fiscal security is under tremendous pressure, resulting in delays in the payment of housing subsidies,” Weifang Zhucheng City’s finance department wrote in January.
In March this year, the human resources department of Weifang High-tech Industrial Development Zone stated that the zone had “partially distributed” subsidies and more payments were being processed.
Officials in Zigong and Zibo issued similar responses to those in Zhucheng in April. Also this month, the city of Shangqiu implored everyone to “be patient” and said subsidies would be distributed “when ready.”
None of the municipalities responded to Reuters’ requests for comment.
At its peak, the property market accounted for about a quarter of China’s economic activity, and before the outbreak, budget revenues from land auctions in many cities dwarfed other sources of revenue.
In China, land auction revenue in 2023 will be about 20% lower than pre-pandemic levels in 2019, official data shows. In Zibo, Shangqiu and Weifang, extra-budgetary revenue (including land transfer fees) fell by 30%-50% over the same period.
“People underestimate that the real impact of China’s real estate downturn will be on local governments,” said Logan Wright, a partner at research firm Rhodium Group.
The amount and total number of people affected by unpaid subsidies remains unclear.
Liu Ailun, a 30-year-old civil servant in Shangqiu City, said that some home buyers in the city have received subsidies, but he is still waiting for the promised 30,000 yuan. He has bought an apartment in a “prime location” in June 2022.
“Relevant departments must realize that this problem cannot be ignored for a long time and must be solved, otherwise it will affect the government’s credibility,” Liu said.
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