UBS sees China property turnaround coming sooner than expected

[BEIJING] UBS Group is predicting China’s property sector to recover sooner than previously anticipated, led by a revival in top-tier cities. 

John Lam, head of China and Hong Kong property research at the Swiss bank, now expects home prices to “turn stable” at the beginning of next year, compared with an earlier estimation for the middle of 2026, according to a media briefing on Wednesday (Mar 19).

Lam is known for shocking markets by downgrading China Evergrande Group at the start of 2021, 11 months before the nation’s most indebted developer defaulted during the housing meltdown. He also went on a limb last year by turning bullish on the sector when most of his peers were predicting more gloom.

In the briefing, he cited multiple reasons for the quicker rebound, including a pickup in second-hand home transactions in tier-one and core tier-two cities in February, an increase in premium land sales and a more stable volume of home listings. Similar signs were seen when China came out of an earlier real estate slump in 2014 to 2015, he said.

After four years of correction, the inventory turnover time in tier-one cities has returned to an average of 14 months, the same level as 2015, according to Lam. That could prompt developers to expand land reserves and build better-quality apartments to sell at a higher price, he said.

Still, Lam expects the Chinese property market will grow more polarised. He favours regional developers in top-tier cities, saying those with premium land banks there will have more flexibility to plan projects than builders that operate nationwide. BLOOMBERG