China home sales drought persists despite mounting support

China’s home sales slump dragged on in February, even as regulators stepped up efforts to salvage the beleaguered property market. 

The value of new home sales from the 100 biggest real estate companies slid 60 per cent from a year earlier to 185.9 billion yuan (S$34.7 billion), following a 34.2 per cent decline in January, according to preliminary data from China Real Estate Information Corp. February’s sales were down 20.9 per cent from the previous month. 

The property downturn remains a major headwind for China’s economy, ratcheting up pressure on developers that are struggling to repay debts and complete projects. 

Country Garden Holdings, once the country’s biggest builder, this week received a creditor’s petition filed in a Hong Kong court to wind up the company over a missed debt payment. The move came a month after China Evergrande Group was ordered to liquidate, marking the largest collapse in the three-year downturn.  

Policymakers have increased pressure on banks to boost their property loans through so-called white lists. In a flurry of activity, state-owned lenders have earmarked at least 124 billion yuan of loans for property works eligible for support, state media reported earlier this month.

The drop in housing prices and job losses mean that the government needs to start issuing stronger stimulus measures, said Goodwin Gaw, chairman of Gaw Capital Partners. 

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“The bottom is near, they have got to start stimulating,” Gaw said at the PERE Asia Summit in Singapore on Thursday (Feb 29). 

The housing ministry has told local governments to prevent the property market from seeing “big swings” in pricing.

Another key step was broadening the use of commercial real estate loans for developers to help them repay other debt. The government also increased support for the troubled property sector with its biggest-ever cut to a key mortgage reference rate, which may entice homebuyers as prices fall. 

Yet market watchers warn that a meaningful sales rebound hinges on even stronger policies. 

“We doubt that those measures alone will be sufficient to restore confidence in the property market,” Serena Zhou, senior China economist at Mizuho Securities, wrote in a note this week. “Unconventional measures will likely be essential.” BLOOMBERG