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 furnish and furnish an apartment she bought two years ago. She is still waiting for the money and has yet to move in.
The 30-year-old now pays 6,000 yuan of her 8,000-month salary for the mortgage on the 1.1 million yuan apartment and another 1,800 yuan to rent another apartment, relying on her parents for other basic costs.
“I’m under a lot of pressure,” said Wang, who works in electronics manufacturing and bought the shell of her apartment, without floors, interior walls or other furnishings – as is common in China.
Weifang, with a population of more than 9 million and a larger economy than Croatia, as well as dozens of other Chinese cities have promised homebuyers subsidies and other incentives to shore up the ailing real estate sector.
But the real estate downturn is also affecting cities’ ability to lease land to developers, a key source of revenue.
This meant some local authorities were unable to raise funds to pay promised subsidies, frustrating shoppers and casting doubt on future support measures.
All of this could delay the housing market recovery.
“There is a risk that households will begin to perceive local governments as too cash-strapped to deliver on their subsidy promises,” said Christopher Beddor, deputy China research director at Gavekal Dragonomics.
“This will certainly have an impact on home buying decisions.”
Around 150 people from more than 50 Chinese cities, including Zibo in the east, central Shangqiu and Zigong in the southwest, used a public comment section on the website of the People’s Daily, the Communist Party’s official newspaper, to complain about it Unpaid grants in the last six months.
Authorities in many cities have responded on the same platform, which requires users to register with their identification documents before posting.
Weifang officials, who had promised subsidies of 30,000 to 300,000 yuan as well as tax rebates and other incentives, wrote multiple times blaming COVID-19, the economic downturn and tax cuts for the failure to make payments.
“Unusual short-term conflicts between tax revenue and expenditure and enormous pressure on local financial security led to delays in the disbursement of housing subsidies,” the finance department of Zhucheng, a Weifang-administered municipality, wrote in January.
In March, the human resources department of the Weifang High-Tech Industrial Development Zone said its district had “partially paid out” the subsidies and further payments were being processed.
Officials from Zigong and Zibo issued similarly worded responses to Zhucheng in April. Also this month, Shangqiu asked for “patience” and said the subsidies would be provided “as soon as they are ready.”
Neither city administration responded to Reuters’ requests for comment.
The real estate market accounted for about a quarter of China’s economic activity at its peak, and household revenue from land auctions dwarfed other sources of revenue in many cities before the pandemic.
Across China, land auction revenue in 2023 was about 20% below pre-pandemic levels in 2019, official data shows. In Zibo, Shangqiu and Weifang, extra-budgetary income – which includes land sales – fell by 30-50% over the same period.
“What is underestimated about the downturn in China’s real estate market is that the real impact lies with local governments,” said Logan Wright, partner at research provider Rhodium Group.
The amount and total number of people affected by unpaid subsidies remains unclear.
Shangqiu official Alan Liu, 30, says some home buyers in the city have received their subsidies, but he is still waiting for the promised 30,000 yuan after buying an apartment in a “prime location” in June 2022.
“It is crucial for relevant departments to 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)