Signs of stabilisation in China's housing sector amid policy adjustments

Horizon Insights : No crisis is seen in China's property sector, though there are early signs of stabilisation in the second-hand housing market. Tier 1 cities may have room for policy relaxation, but no new enforceable policies are expected in the second half of 2024 (H2FY'24), with an emphasis on stabilising the housing sector. Although some cities might see improvements in land auctions in the third quarter (Q3), the land market is expected to remain sluggish throughout the year.

The recent nationwide downturn in second-hand housing sales volume suggests diminishing effectiveness of the policy mix. However, tier 1 cities have not experienced a significant drop, with Shanghai seeing a rise in sales volume in June, followed by a modest decline. Market expectations suggest that Shanghai's sales volume for second-hand houses will likely remain around 20,000 units in July, a threshold indicating market stabilisation.

Policies in the H2FY'24 are expected to continue focusing on stabilisation. Most tier 2 and tier 3 cities have lifted housing purchase restrictions, except for six cities: Hainan, Tianjin, Beijing, Shanghai, Shenzhen, and Guangzhou. It is anticipated that Tianjin and Hainan may lift these restrictions, with tier 1 cities likely easing policies further.

Additionally, the central bank has reduced the 5-year Loan Prime Rate (LPR) by 20 basis points, marking a cumulative decrease of 35 basis points to date. This reduction aims to counteract subdued market sentiment due to lower GDP in Q2. However, real estate developers remain under financial pressure, making significant short-term changes unlikely due to the extended accounts receivable collection period for developers.

Note: This article has been written in accordance with an article exchange agreement between Horizon insights and BigMint.