China Property Market Struggles Still Despite Intervention

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Despite a series of government stimulus measures to revive activity in China’s property market, which makes up a quarter of the nation’s economic output, there are still few signs of a recovery in the short term. Homebuyers are cautious about the uncertain economic outlook, and property developers and agents report that sales remain slow following a brief burst of activity in major cities like Beijing and Shenzhen. Even Daniel Song, a 28-year-old computer programmer from Beijing who was given 3 million yuan ($410,043) by his parents at the beginning of the year to buy an apartment, has given up on the idea because of concerns about his income security. 


China has accelerated its policy stimulus in recent weeks in response to the deepening debt crisis in the sector, highlighted by the severe liquidity troubles in China Evergrande Group (3333. HK) and Country Garden (2007. HK). However, these support measures have yet to have any significant impact on buyers who are still grappling with low confidence. In September, new home prices in China fell for the third consecutive month, down 0.2% from August, which is typically a peak home buying period, according to official data released on Thursday. 


Separate figures this week also indicated that property sales and investment extended double-digit declines, down 19.8% and 18.7% respectively, which suggests that the world’s second-largest economy is not yet out of the woods, despite better-than-expected headline gross domestic product data. While much of the easing policies has reduced buying costs, it has done little to create new demand, said realtor Centaline China CEO Andy Lee. 


Sales in October are expected to remain slow, developers said, as few of the visits from buyers to sites have resulted in actual purchases. An official at a developer who has projects in major cities said its sales during the Golden Week were 20% lower than a year ago, though better than September. The person, who declined to be named because he was not authorized to speak to media, added that sales have dropped again after the holiday ended.


Nomura also said that it’s too early to call the bottom for the property sector. “Recent property easing measures may have only led to more supply of homes, adding more downward pressures on home prices, given still-sluggish housing demand. The moderate recovery in top-tier cities could continue to drain housing demand in low-tier cities,” it said.


Sales performance varied significantly across cities, with new home prices up on a monthly basis in Beijing and Shanghai in September, while they were down in Shenzhen and Guangzhou. Demand remained lukewarm in smaller cities struggling with excess supply.


S&P Global Ratings revised its forecast for China’s property sales to drop by 10%-15% this year from 2022, compared to its earlier forecast of a mid-single-digit percentage drop. It also expects 2024 sales to drop by a further 5%.


“In a bad real estate market and a dismal economy, I don’t have that much desire to buy a new house, and I want to keep the money in my hands,” said Doris Dong, a 30-year-old housewife living in Beijing.

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