Small gain: A man passing by apartment buildings under construction in Shanghai. Government measures to rescue the property sector may be having an effect. — Bloomberg
BEIJING: China’s property market is showing some early signs of stabilisation this year after the government increased support for cash-strapped developers and loosened home purchase restrictions to counter a slump.
Housing sales snapped more than a year of decline to post a small gain in the first two months of this year, according to data released by the National Bureau of Statistics (NBS) Wednesday.
The figures helped send a Bloomberg gauge of Chinese developers up by 2.4% at Wednesday’s close after a seven-day losing streak.
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 at ING Groep NV, wrote in a note.
“Consequently, we only expect positive growth of real estate investment to return in 2024.”
Chinese authorities have made it clear that they would focus on shoring up the balance sheet of “quality” developers, a signal that consolidation is likely to get rid of riskier companies.
China Evergrande Group, the defaulted developer at the centre of the nation’s property debt crisis, is facing a court hearing next week in Hong Kong on a petition to wind up.
Home sales rose 3.5% by value in the first two months of the year from the same period in 2022, according to the NBS.
That marked the first increase since June 2021, according to Bloomberg calculations.
By floor space, sales fell 0.6% year on year, narrowing from the double-digit slumps seen for nearly a year and a half.
The official data came after figures from China Real Estate Information Corp showed home sales rose last month for the first time in 20 months, with that rise partly helped by a low comparison base last year when the Lunar New Year holiday fell in February.
The floor space of new housing starts, an indicator analysts monitor closely to assess sentiment among developers, fell 8.7% from January to February from a year earlier, the NBS data showed.
That was much improved from the double digit plunges seen each month from mid-2021, and a sharp turnaround from the 50% decline in November last year.
Residential property investment showed a similar trend with its slide slowing to 4.6% after six straight months of double-digit decreases.
The NBS did not provide a figure for acquisition of land – another key index for clues about builders’ confidence – as it usually does. That data should give an indication of the income of local governments from selling land, which tumbled due to the housing crisis, adding to the fiscal stresses facing provinces and municipalities.
Domestic loans extended to developers fell 15% last month, better than the 25% reduction in 2022 as banks heeded official calls to fund quality firms.
The total amount of funds received by the building companies decreased 15% as self-raised funds and deposits and payments from home buyers – the two biggest sources of funding - dropped 18% and 11%, respectively.
“Many lower-tier cities are still under severe pressure, owing to high unsold housing inventories and much weaker underlying property demand,” said Duncan Wrigley, chief China economist at Pantheon Macroeconomics Ltd.
“We expect a gradual recovery in the national property data over this year.” — Bloomberg
