China's property sector awaits more stimulus measures

The Chinese property sector has faced a rocky road in the first half of this year, and the market now awaits more stimulus policies from the central and local governments amid a still-challenging outlook in the months ahead, according to Chen Xiaotian, president of EH Consulting, a real estate consulting firm in China.

"Many real estate developers restored confidence at the beginning of this year, as the release of pent-up demand did give a brief boost to the property market. However, since mid-to-late March, the situation has worsened in most cities (across China)," Chen told delegates attending the 2023 Steel China Conference in Shanghai late last week.

Chen's remarks were echoed by the data from China's National Bureau of Statistics (NBS), which showed that the country's property sales recorded a 0.9% on-year drop to 464.4 million sq m during January-May this year, while total housing inventories swelled 15.7% on year to reach 641.2 million sq m by end-May.

Moreover, the total area of newly-launched projects across China slumped 22.6% on year to 397.2 million sq m in the first five months, and that of projects under construction also decreased 6.2% on year to 7.8 billion sq m, according to the NBS data.

Notably, the total area of new starts this year may decrease to some 960 million sq m, mainly due to factors such as low market expectations and cooled land transactions, Chen warned.

In terms of investment, China's fixed asset investment in the property market declined 7.2% on year to Yuan 4.6 trillion over January-May, as per the NBS data.

Most real estate enterprises in China have adopted a cautious stance, though top players have been showing some resilience to the market lull, Chen said. He also projected that the funding in the domestic property market may slide by another 8% on year in 2023.

"There is no doubt that the Chinese government will beef up efforts to maintain stability in the property sector. In fact, we've already seen some positive signals in June, such as the new progress in property developers' funding plans and the introduction of more house purchase support policies by several municipal governments," Chen believed.

While China is expected to unveil more incentive measures to shore up the property market as a pillar industry to the economy, it's unlikely to see excessively strong stimulus this year, as the country's policy of "houses are for living, not for speculation" remains in place, Chen highlighted.

Rather, the policy emphasis will be placed on meeting the essential demand from first-time homebuyers and house upgraders, he added.

Besides, the Chinese government will continue to prioritize the timely delivery of presold homes. Over January-May this year, the country's completed housing area increased 19.6% on year, according to the NBS data. And Chen estimated the figure for the whole year is expected to exceed 1 billion sq m.

Chen also told the delegates that China's housing sales may see a "pulsatile" pattern characterized by repeated cycles of demand release and accumulation, and there could be a short-term recovery in housing sales following a period of demand accumulation over April-May.

In future, those state-owned enterprises and central enterprises may take up 70% of China's total property market share, while high-quality and emerging private developers will account for the remaining 30%, Chen noted.

Written by Alyssa Ren, rentingting@mysteel.com

Edited by Zhenqi Yang, yangzhenqi@mysteel.com

Note: This article has been written in accordance with an article exchange agreement between Mysteel Global and SteelMint.