China’s slump in home sales slows after cities ease policy
THE downturn in China’s residential real estate sector slowed further in June, following the government’s efforts to put a floor under the housing market in some of its biggest cities.
The value of new-home sales from the 100 biggest real estate companies dropped 17 per cent from a year earlier to 439 billion yuan (S$81.9 billion), compared with a 34 per cent decline in May, according to preliminary data from China Real Estate Information Corp.
The slower fall came after three of the nation’s biggest cities – Shanghai, Shenzhen and Guangzhou – followed through with easing measures in late May, slashing down-payments and allowing cheaper mortgages, after the central government unveiled a broad real estate rescue package. The capital Beijing became the fourth of the so-called tier-1 cities to follow suit in recent days.
The turn in the trajectory of new-home sales may offer some relief for China’s economy, which is on track to undershoot the government’s official 5 per cent growth target for this year, Bloomberg Economics estimated this week. The property crash has hindered growth despite a flurry of support measures, even as other economic gauges including industrial production have steadied.
The loosening has boosted new-home sales in southern Shenzhen and Guangzhou into June, with average daily new-home units sold in the first 25 days up more than 30 per cent from May, data from China Index Holdings showed. It has led to mild gains in Shanghai, with sales up 11 per cent.
Still, housing-support steps to date have failed to halt a broader slide. Two credit ratings firms recently lowered their forecasts for China’s property market, with S&P Global Ratings’ onshore unit and Fitch Ratings now forecasting annual property sales to drop at least 15 per cent from last year.
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Wall Street economists are predicting new measures and additional funding in Beijing’s bid to shore up the market, after top policymakers urged officials in a cabinet meeting earlier this month to keep an “open mind” over policies to reduce housing inventory and be more “creative and bold” in rolling out supportive measures.
Cash-strapped developers, many in default for more than a year, are counting on a sales revival to persuade debt holders and fight off their liquidation.
Earlier this week, Kaisa Group was given more weeks to work on its debt restructuring plan by a Hong Kong court, but was also warned this might be the company’s last chance. Dexin China last week became the latest builder to be ordered to liquidate by a Hong Kong court.
Funding for developers has stayed weak since the government drew up a “white list” of property firms that are eligible for loans late last year. A broad gauge of financing for developers, including loans, bonds and proceeds from home sales, continued to shrink heavily in May, down 24 per cent from a year earlier, latest official data showed.
Investors are yet to be convinced that the housing slump has reached a turning point. Shares of Chinese developers have slid further into a bear market, dropping more than 25 per cent from a mid-May high.
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