The turning tide: Is China’s housing market set to rebound?
Lianhe Zaobao senior correspondent Chen Jing notes that the recent measures implemented by the Chinese authorities and targeted at the real estate market has led to a sudden uptick in the stock market. However, it remains to be seen if it will last long enough to boost consumer confidence.
The sluggish Chinese stock market finally surged last week, with the Shanghai Composite Index up 350 points over five trading days and breaking through the 3,000-point mark, while the CSI 300 Index capped its best week since 2008. Hong Kong’s Hang Seng Index also jumped and rose above the 20,000 level after more than a year.
In particular, real estate stocks have risen prominently across all sectors of the stock market. China’s A-share property stocks rose, with more than 20 stocks hitting the daily ceiling on 26 September, and an additional dozen more on 27 September. Hong Kong-listed real estate enterprises collectively surged as well, with the biggest gainer Kaisa Group seeing its share prices soar 92% over the two days.
The property stock surge came after the Politburo of the Chinese Communist Party (CCP) met on 26 September.
This is the first time that CCP higher-ups have explicitly demanded the need to stabilise the property market and reverse its downturn.
Authorities’ focus on property market
The meeting stressed the need to stabilise the property market and reverse its downturn, strictly control the increment of construction of commercial housing, optimise the existing housing stock, improve quality, increase loan support for “white list” projects, and revitalise idle land.
This is the first time that CCP higher-ups have explicitly demanded the need to stabilise the property market and reverse its downturn. This not only points out the problems faced by the property market, but also signals that there will be even stronger measures to rescue the market.
Typically, the Politburo reviews the economic situation at its April, July and December meetings, while its September meeting focuses on the internal discipline and work of the CCP. This is yet another unexpected economic meeting held by the country’s decision-makers following the March 2020 Covid-19 outbreak, highlighting the severity of the current economic situation, whereby one of the biggest stumbling blocks to economic recovery is the property slump.
Property investment in China fell 10.2% year-on-year in the first eight months of 2024, with property sales by floor area over the same period slumping 18.0% year-on-year. Despite the traditional peak season of the “Golden September and Silver October”, purchasing power remains weak. Based on statistics, 12 major cities recorded the lowest average daily number of new home sales during the mid-September Mid-Autumn Festival holidays since 2018.
... expectations are always unmet time after time, with the effect of the policies lasting a month or so before the market declines again.
Slew of measures
Since last year, the Chinese government introduced a slew of measures to prop up the property market. Whenever relevant policies are introduced, public opinion always asks: has the property market bottomed out? Will the market rebound soon? But expectations are always unmet time after time, with the effect of the policies lasting a month or so before the market declines again.
An industry practitioner lamented that the market is currently seeing those with money holding off from buying a home and those who want to buy a home do not have the money to do so — “until this fundamental problem is solved, whatever that is introduced is just a drop in the ocean”.
The rich do not want to buy a home because the market is expected to remain sluggish and home prices may continue to fall, so they continue to wait and see. Meanwhile, the people in need of a home are worried that the sluggish economic situation will lead to wage stagnation and even job insecurity, and are thus hesitant to purchase one.
The recent Politburo meeting has made more specific and targeted deployments of real estate policies, calling for a “response to public concerns” with adjustments to home purchase restrictions, a reduction in existing mortgage rates, and an urgent improvement of policies related to land, taxation and finance. These are aimed at a new model for real estate development.
Last week, the People’s Bank of China (PBOC) took the lead in announcing new measures to support the housing market, including reducing existing mortgage rates by 0.5 percentage point and the minimum down-payment ratio for second home purchases nationwide from 25% to 15%. In order to promote consumption and investment, the PBOC has also injected more liquidity into the market through unexpected cuts to interest rate and reserve requirement ratio.
Additionally, the authorities have targeted measures for the labour market and capital market, announcing initiatives to boost employment for key demographics and invigorate the capital market.
Compared with previous efforts, this round of stimulus measures is more impactful and covers a wider scope, and will most likely provide an immediate boost to market confidence.
Barrage of positive news
The decline in the housing market is a key factor dragging down the overall economy, and revitalising the housing market is closely tied to various aspects of the economy. Compared with previous efforts, this round of stimulus measures is more impactful and covers a wider scope, and will most likely provide an immediate boost to market confidence.
On the day of the Politburo meeting, the state-owned Poly Group launched a “price protection” initiative in several cities, including Xi’an, Chengdu and Wenzhou, addressing buyers’ concerns about continuous price drops by promising that their properties will not be further discounted. As an industry leader, Poly’s commitment to price protection is expected to encourage other developers to follow suit, potentially halting the downward trend in new home prices.
Soon after, on 27 September, Reuters cited informed sources saying that first-tier cities such as Shanghai and Shenzhen are expected to announce a complete lifting of home purchase restrictions in the coming weeks. That evening, Guangzhou announced the removal of such restrictions, possibly marking the complete withdrawal of purchase limits in first-tier cities.
Amid a barrage of positive news, some netizens are anticipating that commercial banks will lower existing mortgage rates before this week’s National Day holiday in China, and more key cities will lift purchase restrictions. There is also growing public interest in whether the home purchase deed tax will be further reduced. On 29 September, the PBOC announced the proposal for all commercial banks to adjust interest rates for existing housing loans (including first and second homes) by 31 October 2024, setting them at least 30 basis points below the loan prime rate.
Currently, official policies and statements from senior leaders have effectively improved market sentiment and expectations. However, whether confidence in the housing market can be stabilised will depend on how quickly these policies can be implemented and enforced.
... the language used in this Politburo meeting on achieving annual economic targets has shifted from “determined to achieve”, to “striving to achieve”...
After all, the Chinese real estate market has already missed “Golden September”, and even if it can maintain a solid performance in “Silver October”, the market has three months left to stabilise and recover within the year.
Moreover, in just two months, the language used in this Politburo meeting on achieving annual economic targets has shifted from “determined to achieve”, to “striving to achieve”, which may suggest a more sober recognition among leaders of the difficulties in achieving a 5% growth this year.
As stated in the meeting, in the face of imminent economic challenges, it is essential to “acknowledge difficulties” in order to prescribe the right remedies and “strengthen confidence”.
This article was first published in Lianhe Zaobao as “楼市终于要止跌了？”.
