China’s Real Estate Market is In The Shadows Despite Government Intervention

China's Real Estate Market is In The Shadows Despite Government Intervention by WSJRenewal

China makes its latest attempt to rescue its crisis-hit housing market, prompting a market rebound in hopes of creating a turning point. However, observers say that a rebound in home sales is crucial to any recovery.

The news sends markets higher, but the success of the new measures remains to be seen.

Since last week, Beijing has implemented several measures to ease pressure on cash-strapped developers, including development and financing bonds and loan repayment extensions.

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The 16-point plan was embraced by investors as China’s most significant effort yet to turn around a market that saw a wave of bond defaults among developers following a crackdown on their highly leveraged finance.

A mortgage payment strike was the response after the crash. Homebuyers were angered by the plethora of unfinished housing projects, sapping confidence in a market reeling from the impact of repeated mortgage payments: closures and other restrictions due to Beijing’s zero COVID policies.

Observers mention that home sales are already down 20% this year and that another outbreak of the virus this month could spell even more trouble for home sales.

China’s new home prices fell at their fastest pace in more than 7 years last month.

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Gavekal Dragonomics, in a Tuesday report, said, “While recent measures to support the real estate sector will surely boost financing for developers, that impact could well be offset by a further drop in sales, which may mean little improvement for the real estate sector in November.”

+But “the real estate sector has yet to show signs of recovery… Beijing’s zero-COVID strategy, despite some of the latest changes, it will continue to weigh on the real estate sector,” he added, referring to China’s recent easing of virus controls.

Barclays has warned that home sales in China could fall another 10% next year.

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