China’s property market is showing some early signs of a stabilization this year after the government increased support for cash-strapped developers and loosened home purchase restrictions to counter a slump.
The value of housing sales snapped more than a year of falls to post a small gain in the first two months of this year, while prices of second-hand homes and most new housing in major cities rose in February for the first time since late 2021, data released this week by the National Bureau of Statistics showed.
The improvement suggests government measures to rescue the real estate sector, which along with the construction industry accounted for 13% of the world’s second-largest economy last year, may be taking effect. Regulators have ramped up financial support for developers and lowered mortgage rates, while buying curbs have been eased in many big cities including Shanghai.
However, indicators of future construction remained weak, with residential property investment continuing to decline, albeit at a much slower pace. That indicates better sales are not yet leading to growth in the housing investment which economists estimate drives up to 20% of demand in China’s economy.
That tracks with data out earlier this week which showed that excavator sales dropped by a third in February from a year earlier after plunging almost 60% in January.
Confidence among property buyers is still low in a sector that was spooked by troubled developers’ failure to deliver home projects last year. Beijing has also vowed to prevent “unregulated” expansion of the industry even though it’s trying to steer a soft landing from the downturn.
“A full return of sentiment needs all uncompleted homes to be finished to a good standard, which is still a concern,” Iris Pang, chief economist for Greater China