Nomura Doesn't Expect Large Scale Property Stimulus

Nomura weighs in post the recent speculation of fresh policy stimulus in the property sector:

"China’s social media on 2 June was active with speculation that Beijing was mulling a comprehensive support package to support the property sector (source: Bloomberg). Also one day earlier, Qingdao, a coastal tier-2 city, announced a raft of property easing measures. Stock markets surged on the news. With a hard landing of China’s colossal property market threatening to cripple the post-Covid growth recovery and haunt the financial sector, markets are becoming increasingly concerned about the potential for a double dip while eagerly expecting Beijing to extend a helping hand. While we are looking for Beijing to take action to arrest the downward spiral, we have a low expectation of what Beijing can do and achieve."

Markets tend to jump on such stimulus-related speculation, but we think it will be different this time. We would take any analogy between now and previous stimulus packages with a grain of salt and, unlike the decision to end the zero-Covid policy, we see no miracle solution that can have an immediate impact on the property market."

"We do not expect another “bazooka” round of policy measures, similar to those implemented in 2015-16 after China’s stock markets collapse, for the following reasons. First, with decision-making now highly centralized, top policymakers will be unable to address every economic issue. Second, with the policy emphasis on “security”, many policy suggestions may be rejected due to national security concerns and other related matters, such as common prosperity. Third, considering the emphasis placed on maintaining key signature policies, such as “housing is for living, not for speculation”, it would be very costly to make a change in stance without losing reputation. Fourth, the toolbox of supportive measures is becoming increasingly small after the PSL-funded shantytown renovation program of 2015-18, which resulted in the front-loading of home demand, high leverage, falling home prices, population outflows, a large overhang of sold but unfinished projects, and the withdrawal of private developers. Policymakers are at least in consensus that they cannot implement another shantytown renovation program in low-tier cities."