Hit to China property likely to be temporary

Beijing

THE hit to China's property market from the coronavirus outbreak could be short-lived, with analysts saying any initial plunge in home sales will probably be made up for later due to latent demand.

While the virus has prompted more than 100 Chinese cities to temporarily close property-sales showrooms, people will delay purchases rather than shelve apartment-buying plans altogether, Huatai Securities analysts led by Chen Shen wrote in a report.

During the Sars outbreak in early 2003, property-sales growth slowed in March and April but picked up in May as the situation improved, according to the report.

Transactions for the second quarter of that year were up 33 per cent versus the same period of 2002, it found.

Demand can hopefully return this time as well as the epidemic comes under control amid a national fight against the virus, the analysts wrote, adding that there's also likelihood for "counter-cyclical adjustments" in liquidity, property and lending policies as the epidemic increases pressure on economic growth.

"We believe property demand will only be delayed but won't disappear," the analysts wrote. "There will be some impact for the short term, but the impact for the whole year is limited."

Developers including China Evergrande Group, Sunac China Holdings and Guangzhou R&F Properties would benefit most from easing of liquidity, given their high leverage and weak cash coverage, Bloomberg Intelligence analysts Kristy Hung and Patrick Wong said.

Evergrande announced over the weekend that sales would only be available online until Feb 20 to reduce people gathering and prevent the coronavirus from spreading further. BLOOMBERG