China’s Property Market in Need of More Government Support to Prevent Deterioration
Analysts are warning that China’s property market, a significant contributor to the country’s economy, requires further government backing to avoid further decline.
In the month of October, prices for existing homes dropped by the largest margin since 2014, while outstanding property loans decreased for the first time in history. Economists at Macquarie stated that these figures indicate a growing strain on both the demand and supply sides.
The government’s current policies have focused on increasing demand, but have not addressed the most pressing issue: the credit risk associated with developers. Macquarie’s report also warned of a possible confidence crisis as sales fall and default risks rise.
Beijing has taken steps to reduce real estate developers’ reliance on debt for growth, and to control the surge in home prices which have made purchasing apartments in major cities unaffordable for many young Chinese households. UBS analysts have estimated that real estate and related sectors make up about 22% of China’s gross domestic product.
Recent market data reveals concerns that the property sector is continuing to worsen, with larger cities leading declines, despite expectations of sustained demand for homes due to the availability of jobs.
To address these concerns, the People’s Bank of China announced a meeting with other financial regulators in order to support lending to real estate developers and called for the development of affordable housing.
While some progress has been made, analysts stress that more support is needed to prevent further risks and to boost private sentiment in the market. Despite the challenges, shares of several major property companies, including Sunac, rose in Hong Kong trading.
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