MNI: China Property To Stabilise Within A Year - Experts

MNI (BEIJING) - Policy support aimed at China’s property sector will stimulate trillions of yuan in new purchases and help stabilise the market within a year, advisors and analysts told MNI, pointing to recent growth in home sales and land prices.

With zero purchasing restrictions in most cities and increased financing support for buyers, the market will bottom in less than 12 months before stabilising, said Cui Guangcan, director of the real estate and urban development centre at Shanghai Normal University.

Beijing’s latest attempt to prop up economic growth and address sluggish capital, and housing markets has restored sentiment, feeding through to increased home and land sales in major cities this month, Cui added, noting an additional cash-based resettlement within renovated urban villages would further push up demand. “Rational expectations are returning, which will help stabilise prices and transactions,” he continued, downplaying chances top tier cities will eradicate purchase restrictions entirely in the short term as current demand-side stimulus will support first-home buyers and upgrades without stirring speculation.

Average daily new home sales contracts signed online in 30 key cities over the two-week period starting Oct 8 grew by 103% m/m, data from the China Index Academy showed recently.

Yan Yuejin, vice president at the E-house China Research and Development Institution, noted some cities had already reported y/y increases so far this month. “The market looks to have turned a corner, particularly first-tier cities,” Yan continued, estimating September’s fall of home sales would mark the lowest point on record.

MONETISED RENOVATION

The Ministry of Housing’s pledge to add one million urban village and dilapidated housing units to a renovation programme via monetary compensation to residents would add additional demand for one million unsold homes, Yan calculated. “The measure likely equals a transaction volume of 100 million square metres, accounting for about 10% of annual sales per square metre,” he continued.

Some analysts question how effective the programme will be, noting its smaller scale compared to the 2015-2018 six-million-unit a year shantytown renewal programme, but Cui said the overall scale is larger than one million units when existing projects are considered. The project will also help stimulate multi-trillions of yuan in fresh spending, he added. 

Li Yujia, chief research fellow at the Guangdong Urban & Rural Planning and Design Institute, said offering residents cash or housing vouchers would help the market digest inventory levels by moving people into already built housing, whereas previous rounds focused on top-down relocation mainly by demolishing existing houses and constructing new buildings.

Li expects authorities to expand the initiative and increase affordable housings purchases to alleviate inventory pressure fully, and boost market sentiment.

However, Yan noted the destocking cycle stood at 25.2 months, exceeding two years for the seventh consecutive month by end-September, indicating strong pressure remained. (See MNI: PBOC Relending Boost More Effective For Housing- Advisors)