Chinese homebuyers scout showrooms at midnight after stimulus
AT 11.12 pm in Shenzhen on Sunday (Sep 29), China’s least affordable city eased rules for homebuyers. Less than an hour later, the first batch of prospective customers showed up at a sales centre for a suburban project by local developer Excellence Group.
The burst of excitement came as China’s so-called tier-1 cities further relaxed restrictions for homebuying, following through on central government calls to prop up the embattled property sector. Policymakers are betting that a recovery in megacities will spread nationwide, reviving confidence in Asia’s largest economy.
“It’s good that we arranged for some agents to stay on call at the showroom,” said an agent surnamed Zhao, who asked not to give his full name because he was not authorised to speak to the media. “We ended up working overnight.”
Others also saw an immediate spike in buyer interest. Multiple agents in Shanghai said they received apartment-viewing requests from people who intend to cancel travel plans during the week-long National Day celebrations to scout properties. Some projects in Beijing scrapped discounts originally planned for the holiday period that started on Tuesday, local media reported.
Chinese stocks, including property shares, staged their biggest rally since 2008 last week as government stimulus enticed investors back to one of the most beaten-down markets worldwide. The swift turnaround in sentiment of retail investors also fuelled hopes that the property market freefall may finally be halted.
Regulators have been relaxing property curbs across China in recent years to put a floor under housing prices that have slumped around 30 per cent in tier-1 cities from recent peaks, shattering consumer confidence in a country where real estate accounts for the bulk of households’ wealth.
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Yet questions remain over whether the latest efforts in the biggest metropolitan areas will spark a recovery across the nation or divert demand away from struggling smaller cities, where most of the country’s massive excess housing inventories lie.
“This could fuel a short-lived rebound like in previous rounds of easing measures,” said Bloomberg Intelligence property analyst Kristy Hung. “This may put a stop to the property downward spiral in tier-1 cities, but probably won’t move the dial for smaller cities.”
A continued slump in the lower-tier municipalities that make up most of China’s new-home sales will impede a broader recovery, said Hung. Underscoring the challenge, sales by the nation’s 100 biggest developers slid 37.7 per cent in September from a year earlier, worsening from 26.8 per cent in August, China Real Estate Information figures showed this week.
China’s Politburo last week made its most determined pledge yet to stabilise the real estate sector after prices of new homes fell in August at the fastest pace since 2014. The People’s Bank of China also allowed refinancing of as much as US$5.3 trillion of existing mortgages for millions of families.
On Sunday, the trading hub of Guangzhou became the first tier-1 city to remove all housing restrictions, saying it would stop reviewing buyers’ eligibility and no longer limit the number of homes owned. Shanghai and Shenzhen said they will let more people purchase residences in suburban areas, and allow some others to buy more homes. Beijing city followed on Monday by expanding eligibility for non-residents to purchase properties.
Authorities are reacting to warnings that China risks missing its economic growth target of around 5 per cent this year. The policy barrage is expected to put the goal back within reach, but doubts remain whether it’s enough to break the country’s longer-term deflationary pressure.
Sales in Shanghai’s second-hand market rose even before the announcements, climbing to 872 transactions on Sep 28 alone, the highest in two months, the Securities Times reported, citing real estate platform Fangdi. That brought total used-home sales in the financial hub to more than 14,000 for the month.
The easing in the big metropolitan areas may spell trouble for smaller cities, as many are running out of policy easing tools and buyers’ interest is shifting to prime locations.
“The elevated housing inventories especially in lower-tier smaller cities remained unaddressed,” said Zerlina Zeng, head of East Asia corporates at CreditSights. “Smaller cities will be further crowded out by big cities and face persistent downward pressure on home prices.”
Analysts estimate China will need one trillion (S$183 billion) to five trillion yuan – depending on the scale and speed at which the government digests housing inventory – to buy unsold homes from developers and convert them into affordable housing.
Buyers also remain concerned that cash-strapped developers will be unable to deliver properties. At least 48 million homes sold in China before completion remain unfinished, according to Bloomberg Intelligence. That’s prompting people to purchase already-built or second-hand homes instead.
To restore confidence in the housing market, the government needs to speed up the completion of presold projects and rejuvenate people’s incomes via other macro stimulus, Morgan Stanley analysts led by Stephen Cheung wrote in a research note.
“It may take time and could still prove challenging to turn around residents’ bearish views with existing policies,” Cheung said. BLOOMBERG
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