Why easing policies might not revive China's property market any time soon

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) - China's real estate market is no stranger to typical business cycles.

) - China's real estate market is no stranger to typical business cycles. Continual expansion and contraction in sales and investment have helped the market grow in value to four times the country's GDP.

As pressure grows on China's growth and local government budgets, the authorities have been making it easy to get a mortgage, eased monetary policy and have encouraged lenders to fund mergers and acquisitions in the real estate sector. Easing policies will also have less effect this time round as many households already bought real estate in the last round of easing from 2015 and 2016, said Lu Ting, chief economist at Nomura Holdings Ltd. The muted recovery reflects the ongoing structural change in the real estate industry as well as the broader economy, in which debt-driven infrastructure and housing spending will play a smaller role in driving growth.

According to a central bank survey of 20,000 bank depositors in the first quarter of this year, 54.7 per cent said they want to save more, the highest figure since the data series began in 2009. Only 23.7 per cent of respondents planned to consume more, representing a third consecutive quarter of decline. Last month, retail sales dropped 3.5 per cent year-on-year, down from 6.7 per cent growth in the January-to-February period.

Analysts expect to see more government policies to prevent the housing market from suffering deeper turmoil given the sector's significance to the economy, though it is uncertain how strong the measures might be. The total value of China's housing market was US$62.6 trillion in 2020, 4.1 times the country's GDP that year and 86 per cent higher than the US housing market, he estimated. In smaller cities and the country's inland and northeastern regions, there's a glut of housing supply. About 70 per cent of cities will see a surplus of housing in the future, Ren said.

 

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