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 Potential homebuyers look at a property model in Shanghai. (YIN LIQIN/CHINA NEWS SERVICE) China is on the right track to deal with its property woes with a new round of policy easing measures recently issued, thus painting a rosy picture for gradual stabilization of a sector key to reviving the world's second-largest economy, said economists of two prominent foreign institutions. They said China has made incremental progress in containing the potential risks in the housing sector, expecting to see more forceful policy efforts to rebalance the economy and digest housing inventories in the coming months. Their comments came as policymakers have pivoted toward more aggressive rescue measures, including more direct government balance sheet support for resolving a housing "stock" supply problem, and a step-up in nationwide demand-side easing. Last week, first-tier cities — including Guangzhou and Shenzhen in Guangdong province and Shanghai — lowered mortgage rate minimums and down payment ratio requirements to boost homebuying enthusiasm. "One of the major positives of the package is a clear focus on supporting inventory digestion rather than just completing ongoing projects," said Robin Xing, chief China economist at Morgan Stanley. "The demand boost also came as a surprise, with a nationwide cut in the down payment ratios to their lowest-ever rates." On May 17, the People's Bank of China, the country's central bank, announced the establishment of a 300 billion yuan ($41 billion) re-lending facility, providing funding for State-owned enterprises to buy completed commercial properties for repurposed affordable housing. Xing said the successful implementation of ongoing policies will likely help gradually rein in the ongoing decline in the housing market. "The announced policies, combined with potential further home purchase relaxations, should facilitate faster market clearing, support liquidity among developers, restore homebuying confidence and (with a lag) improve housing investment." Xing further said he still expects the housing market to contract in 2024 amid continued price headwinds, followed by a milder decline in 2025. For the January-April period, China's property investment fell 9.8 percent year-on-year while sales area of new properties slumped 20.2 percent, compared with 9.5 percent and 19.4 percent falls in the first three months, respectively, said the National Bureau of Statistics. Xing highlighted the importance of introducing more aggressive fiscal stimulus measures to rebalance the economy toward consumption and resolve elevated housing inventories, saying, "this could be through a decisive rise in social welfare spending to unwind the elevated precautionary savings, as well as a massive housing purchase plan to convert developers' unsold units into social housing, with faster implementation". "We believe these measures, if implemented, would effectively increase disposable incomes of low-income families for consumption, and help improve homebuying sentiment. "We believe Beijing is heading in the right direction with regard to ending the housing woes," said Lu Ting, chief China economist at Nomura. "We think markets need to exercise more patience when awaiting more measures." Lu said the country has already pivoted from building public housing to ensuring the delivery of numerous presold homes to rebuild buyer confidence, marking a significant step toward stabilizing the property sector. Looking ahead, Lu said the real focus is finishing sold and unfinished homes. |
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