China’s property investment declines slow but sector still shaky

CHINA’S fragile housing market opened this year with slower declines in property investment and sales, buoyed by government efforts to arrest a protracted downturn in the sector, however, analysts were wary of calling an end to the downturn just yet.

Property investment in China fell 9.0 per cent year on year in the first two months of 2024, compared with a 24.0 per cent fall in December 2023, National Bureau of Statistics data showed.

Property sales by floor area logged a 20.5 per cent slide in January-to-February from a year earlier, compared with a 23 per cent fall in December last year.

Official property figures released last week showed the sector struggling to stabilise with home prices down 0.3 per cent on a month-on-month basis in February, in line with a drop in January.

Hwabao Trust economist Nie Wen said real estate remains in a downtrend and that a smaller slowdown in investment is unlikely to change that with developers still struggling for cash flow.

“But the phase when property had the greatest negative impact on the economy should have passed, and it needs to be seen when the sector will bottom out,” Nie said.

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China has been ramping up measures to reinvigorate its fragile property sector after a regulatory crackdown on developer leverage led to a snowballing liquidity crisis.

Authorities launched a so-called “whitelist” mechanism in January, channelling funds from state banks into local property projects identified by city governments as justifiable for financing support.

China last month announced its biggest reduction in benchmark mortgage rates to prop up the sector.

However, market participants mostly remain unswayed with home buying and financing and construction starts for real estate firms continuing to fall.

“The future of real estate depends on whether investment in the three major projects – affordable housing construction, urban village renovation and emergency public infrastructure construction – can offset the decline in property investment and the release of accumulated upgraded home buying demand,” said Nie.

Household loans, mostly mortgages, contracted 590.7 billion yuan (S$82.08 billion) in February, according to Reuters calculations based on central bank data, after rising 980.1 billion yuan in January.

New construction starts measured by floor area plunged 29.7 per cent year on year, after an 11.56 per cent plunge in December 2023.

Funds raised by China’s property developers were down 24.1 per cent on year after a 17.8 per cent drop in December last year.

“More support for the property sector is still needed,” said economists at HSBC in a research note.

HSBC said further policies to remove home purchase restrictions in more cities and direct government support to boost public housing supply would help an eventual stabilisation in the sector. REUTERS