Dawn appears for real estate sector after government policy easing, but analysts said improving financial structure is key to real estate recovery
China is looking to keep the real estate market stable this year after the rollercoaster of 2016, with measures to prevent surges in big cities and rising inventories in smaller towns. File photo: Xinhua
A total of 36 Chinese cities introduced policies to support the real estate market in the first 15 days of May, according to incomplete statistics, indicating an easing of policies to support home sales. But analysts said the housing downturn is significant and can only be resolved by addressing the sector’s financial structure and curbing the pandemic.
China saw a sharp annual decline in home sales from January to April. Commercial home sales were 3.78 trillion yuan ($556 billion), down 29.5 percent year on year, with residential home sales down 32.2 percent, statistics showed Monday. by the National Bureau of Statistics (NBS).
Investment in property development also fell 2.7% year-on-year.
“We can see real estate investment hasn’t slowed down much, but sales are down as supply outstrips demand. The sector will face fierce competition in the near term, and house prices could see a downward trend in the medium term,” Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center affiliated with the International Business School of Zhejiang University, told the Global Times on Monday. .
He said that even with an easing of policies or government support measures, the downward pressure in the real estate sector is significant.
China’s central bank and banking regulator on Sunday lowered the mortgage rate for first-time home buyers by 20 basis points from the benchmark prime rate (LPR).
This policy will allow local mortgage rates to be as low as 4.4 percent, which is very favorable, Yan Yuejin, research director at the Shanghai-based E-house China R&D Institute, told the Global Times on Monday.
In response to the policy measures, more than half of the stocks of real estate-related companies closed higher on Monday.
Many cities have released support measures to boost real estate sales. One of the latest examples was in Langfang, north China’s Hebei province, where the interest rate on first-home mortgages from some banks rose from 5% to 4.6% on Monday. , which is the same as the LPR rate for five and more years. Langfang is only 30 kilometers from Beijing Daxing International Airport.
In Changsha, Hunan Province (Central China), a house purchased and used for rental will not be included in the calculation of married quarters. Residents who buy a second home there cannot take advantage of the advantageous rates.
Some analysts have said that risk prevention in the real estate sector should be on the agenda. The most critical task is to optimize the credit structure.
Yan said that the easing and strong implementation of credit policies, as well as the continuous improvement of the financing environment for real estate companies, are crucial for the recovery of the real estate market.
The new measures won’t have a big effect in the second quarter, Tian Yun, a former vice director of the Beijing Economic Operations Association, told the Global Times on Monday.
“After all, supply chains across the country have not been fully restored. In the current situation, the demand for buying a home will not be increased by the reduction in mortgage rates. economy recovers significantly in the next two months, demand will increase significantly in the third and fourth quarters,” Tian said. Agencies expect sales to pick up after June.
“The contribution of real estate and related industries, such as furniture and appliance manufacturing, to China’s GDP is over 20%. But the share of real estate in the national economy has fallen compared to the second quarter of 2021,” Tian said.
China recorded an 8.1 percent growth in GDP last year, reaching 17.7 trillion U.S. dollars, accounting for 18 percent of the global economy, according to the NBS.
“The decline in the contribution of real estate has been partly replaced by exports, partly offset by the upgrading of domestic mid- and high-end industries, and changes in the structure of consumption,” Tian said.
He warned that the contribution of real estate cannot be completely replaced, as the growth of the economy is inseparable from the growth of domestic consumption.
“We should objectively recognize that in addition to children’s educational consumption, real estate expenses are almost the biggest type of expenses in Chinese families,” Tian noted.