China’s new home prices to remain flat in 2023, dragging economy: Reuters poll

A construction site of Chinese developer Country Garden’s residential buildings is pictured in Tianjin, China, on Aug. 18, 2023. REUTERS/Tingshu Wang/File Photo Get license rights

BEIJING, Aug 28 (Reuters) – China’s new home prices will show no growth this year, a Reuters poll showed, as it struggles to restore confidence.

House prices are expected to grow 0% year-on-year, compared with a 1.4% gain in the previous forecast in May, a Reuters poll of 12 economists conducted Aug. 16-25 showed.

Confidence in China’s real estate sector, which accounts for a quarter of the economy, suffered last year after many homebuyers threatened to stop repaying mortgages as developers were unable to build pre-sale housing projects due to liquidity and tight Covid-19 restrictions.

„The slowness of China’s economic recovery and conservative consumption by residents show that the confidence of property market participants has not yet recovered,” said Wang Jingbing, senior analyst at Fitch Bohua.

Authorities have introduced several measures over the past year to boost the sector, including smaller down payments, allowing larger mortgages and cuts in mortgage rates. However, optimism remains low, partly due to persistent liquidity problems among property developers and a broader slowdown in the economy.

Property investment is expected to fall 7.7% year-on-year this year, much faster than the 4.2% fall forecast in the May poll, while home sales, measured by floor area, are expected to decline from a 5.0% year-on-year gain in 2023. 2.7% in the previous poll.

The world’s second-largest economy has seen a rapid loss of momentum since the second quarter following an initial post-Covid recovery, dragged down by weak demand at home and abroad, rising unemployment and property sector woes.

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„It is estimated that every one percentage point decline in property investment can reduce the GDP growth rate by 0.1 percentage points,” said Ma Hong, an analyst at Zhixin Investment Research Institute.

Despite Beijing’s supportive measures, Chinese observers are skeptical that the property sector may soon turn a corner.

Three Chinese ministries issued detailed rules on Friday, allowing local governments to remove the „no mortgage registration” rule for determining the status of „first-time home buyers.”

Big cities are expected to loosen property restrictions in some suburbs, „but this is not going to save the entire real estate industry from a downward spiral,” said Gao Yuhang, an analyst at CSCI Pengyuan Credit Rating Limited.

Seven out of 12 economists see an improvement in purchase prices for first-time home buyers in the coming year.

However, ANZ economist Xing Zhaopeng said employment for young people would be a big issue for first home buyers.

The government has withheld data on youth unemployment in what analysts say is a sign of a regulatory crackdown on big employers in real estate and other industries.

(For other stories from the Reuters Quarterly Housing Market Poll 🙂

Reporting by Liangping Gao and Ryan Wu; Additional reporting by Shuyan Wang; Editing by Sri Navaratnam

Our Standards: Thomson Reuters Trust Principles.

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