China home prices to pick up, but outlook remains soft

Beijing

CHINA'S home prices are expected to grow slightly faster this year than predicted a few months earlier while sales will stay soft, as Beijing refrains from strong easing to cushion the coronavirus-led slowdown in the sector, a Reuters poll showed.

The property market has shown some signs of recovery, helped by cheaper credit and incremental policy easing as the Chinese economy emerges from its novel coronavirus lockdown.

But still, weak consumer confidence and fears of a second wave of virus infections may dampen chances for a sustainable rebound.

Average residential property prices are estimated to rise 3.75 per cent in 2020, said 13 analysts and economists surveyed from June 15-19.

The forecast was firmer than a 3.25 per cent gain tipped in a February survey, but down from 6.6 per cent growth in 2019. Home prices are seen slowing to 3 per cent in the first half of 2021.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

"As the epidemic gradually subsides and credit environment improves, home purchase demand continues to be released, which has provided effective support for housing prices," said Huang Yu, vice-president of China Index Academy, a Beijing-based property research institute.

"Looking at the whole year, China's home prices do not have a basis for sustainable and broader gains due to uncertainties over the macro economy and the epidemic, official curbs on speculation and residents' gloomy income expectations," she added.

Markets in some larger cities have gained momentum on pent-up demand and easier mortgage access. A lack of investment options and some discount sales have also underpinned demand from wealthy people.

Prices in Beijing, Shanghai, Guangzhou and Shenzhen grew a faster 0.7 per cent in May from April compared with 0.2 per cent previously, official data showed last week.

Property transactions are expected to fell 4.5 per cent this year, unchanged from the previous poll, and versus a 0.1 per cent drop in 2019. Investments are estimated to rise 5 per cent this year, against a 6 per cent growth projected in the previous poll.

"For the second half of this year, China's housing market will encounter combined headwinds including the epidemic, economic downturn, shrinking family wealth, and level of market liquidity," said Daniel Yao, head of research for China at JLL, a commercial property services provider.

Most survey respondents expect smaller cities to slightly relax market curbs, while they said larger cities will likely maintain curbs or even tighten policy to avoid bubble risk.

"Tier 3 and 4 cities are facing enormous fiscal pressures as fiscal revenues fell sharply and expenditure jumped. It is hard for them to maintain the situation," said Sun Binyi, vice-head with China Real Estate Appraisal Centre.

Asked to rate the affordability of Chinese housing on a scale, with one being the cheapest and 10 the most expensive, analysts' median answer was seven - in line with the last poll. REUTERS