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TD Securities: China Property - Long Road To Recovery

CHINA

TD Securities write “China's property sector is undergoing a crisis of confidence. Homebuyers are reluctant to purchase amid fears that construction will not be completed. Covid lockdowns have exacerbated fears, which have hurt spending and put buyers off. Property construction has collapsed, while developer liquidity has worsened, and prices have fallen. Official measures to support the market include an easing of property restrictions, lower mortgage rates, policy banks support to fund completion of stalled construction projects, measures to improve developer liquidity, etc.”

  • “However, while the above are supportive there is no big bang stimulus that will turn the sector around quickly. Developer liquidity will likely show some improvement in the months ahead as sales begin to pick up, helping overall construction activity. Nonetheless, the funds utilised are simply not large enough to prompt a quick turnaround given concerns about fuelling leverage.”
  • “Homebuyer caution is likely to remain in the months ahead until and unless there are much larger funds allocated and Covid restrictions ease significantly, neither of which look likely anytime soon. Given the large weight of the property sector (up to 30% of GDP), we maintain our view of limited growth recovery, with GDP expected at 3.1% this year and 4.7% in 2023.”
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TD Securities write “China's property sector is undergoing a crisis of confidence. Homebuyers are reluctant to purchase amid fears that construction will not be completed. Covid lockdowns have exacerbated fears, which have hurt spending and put buyers off. Property construction has collapsed, while developer liquidity has worsened, and prices have fallen. Official measures to support the market include an easing of property restrictions, lower mortgage rates, policy banks support to fund completion of stalled construction projects, measures to improve developer liquidity, etc.”

  • “However, while the above are supportive there is no big bang stimulus that will turn the sector around quickly. Developer liquidity will likely show some improvement in the months ahead as sales begin to pick up, helping overall construction activity. Nonetheless, the funds utilised are simply not large enough to prompt a quick turnaround given concerns about fuelling leverage.”
  • “Homebuyer caution is likely to remain in the months ahead until and unless there are much larger funds allocated and Covid restrictions ease significantly, neither of which look likely anytime soon. Given the large weight of the property sector (up to 30% of GDP), we maintain our view of limited growth recovery, with GDP expected at 3.1% this year and 4.7% in 2023.”