China’s property market may keep struggling despite stimulus

It’s becoming clearer that China’s stimulus policies for its beleaguered property sector aren’t enough to lift its fortunes early this year, with disappointing monthly sales data the latest sign that a recovery is some time away.

“There has been no sign that the sector’s fundamentals have bottomed out,” Nomura analysts Jizhou Dong and Riley Jin said in a research note following the release of data showing property sales value fell 17% on year in December.

The drop marked a widening from November’s 9% decline, while property sales volume also worsened with a 13% contraction.

“Despite the relaxation of measures, housing transactions remain at low levels,” added Tommy Xie, OCBC Bank’s head of Greater China research and strategy.

Chinese officials in recent months have unveiled a series of property stimulus measures to steady one of the primary engines of the world’s second-largest economy. Beijing and Shanghai, China’s most populous cities, last month trimmed required down payment levels for home buyers, while Beijing also boosted available lending for building affordable housing and for urban village renovation programs by 350 billion yuan (US$48.76 billion).

While demand remains weaker than expected, a surge in supply also drags on the market, Xie said. The outlook may remain sober this year amid worsening income expectations and a negative wealth effect from the equity market that has led to a rise in foreclosures, he added.

Mortgage loan demand remains weak. Floor space starts, a key indicator for future property investment, dropped 21% on year, signaling continued weak demand in the sector, HSBC Global Research analysts wrote in a note.

“The trajectory of China’s property market suggests that a definitive turnaround may not materialize until the peak of the foreclosure cycle is reached,” Xie said.


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