China’s property sales outlook worse than ratings firms expect
TWO global credit ratings firms lowered their forecasts for China’s property market, as an accelerating slump in home prices hampers the country’s efforts to rescue the sector.
S&P Global Ratings now expects residential sales to drop 15 per cent this year, more than the 5 per cent decline it projected earlier. That will put sales below 10 trillion yuan (S$1.9 trillion), around half the peak in 2021, the ratings company said on Thursday (Jun 20).
Fitch Ratings on Wednesday cut its annual sales estimate to a decrease of 15 to 20 per cent, worse than an earlier estimate of a 5 to 10 per cent drop.
The ratings firms’ bleaker outlook suggests they have little confidence that recent stimulus measures will end the property slump that’s dragging on the world’s second-largest economy.
The institutions blame a bigger-than-expected drop in home prices, which deters buyers. Values of new homes fell the most in almost a decade in May, official figures showed this week, while used-home prices had the sharpest decline in at least 13 years.
Real estate accounts for about 78 per cent of household wealth in China – double the US rate – and families typically save for years and borrow from friends and relatives to purchase a home.
Policymakers unveiled a broad real estate rescue package last month, involving relaxing mortgage rules and encouraging local governments to buy unsold homes.
Three of the nation’s biggest cities – Shanghai, Shenzhen and Guangzhou – have since rolled out major easing meassures for homebuyers, slashing downpayment requirements and allowing room for cheaper mortgages. BLOOMBERG
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