The ongoing coronavirus, which has haunted businesses across China, is also raising concerns about a potential contraction in housing prices in the country.
In January, China's home price growth slowed to an 18-month low, but it may likely fall a lot further as Beijing's long-running attempts to rein in the property market meet with effects from the coronavirus outbreak.
China's leading property developer, Evergrande Group (OTC: EGRNY), is offering its largest price cut ever, said Liu Xuefei, vice president of sales at Evergrande. This includes 25% off housing purchases until the end of the month, when the discount will decrease slightly, to 22%, for the duration of March, Liu said.
Several Chinese real estate titans, including Sunac China Holdings, Sinic Holdings, and Country Garden (OTC: CTRYF) have begun allowing customers to cancel purchases within 30 days of the contract being signed, hoping the risk-free incentive will attract new buyers.
At the same time, while the luxury real estate market in the U.S. is already facing headwinds, fear stemming from the spread of the coronavirus could exacerbate challenges.
The U.S. has suspended entry into the U.S. of foreign nationals who have visited China within the past 14 days in an attempt to stem the spread of the virus - which will likely impact the U.S. housing and travel sectors.
Foreign buyers were pulling back, and Chinese purchasers comprise an important piece of that demographic. According to data from the previous year, Chinese buyers spent about $13.4 billion on U.S. homes from April 2018 through May 2019 - which was a 56% decline from the same period the year prior.
Coronavirus fears have sent mortgage interest rates even lower, from January to February, and most likely February into March. A furthering of decline could push more eager homebuyers into the market, but also cause sellers to raise prices, which could do more harm than good in the long-term.