More hardship for China housing market
The Chinese housing market is braced for more hardship, after price cuts by developers and easing measures adopted by Beijing failed to boost sales during last week’s labour week holiday. The country’s economy has been hit hard by its latest Covid-19 outbreaks, and many companies have been forced to close down because of long lockdowns, such as those in Shanghai. This has created uncertainties about jobs and employment.
“Home buying has been deterred by economic uncertainties. People would prefer to save money for a rainy day, in case they are sacked,” said Andy Lee, CEO for southern China at Centaline Property Agency (China). “Job security has become the major concern, rather than owning a home. What most people are worrying about is their mortgage-repayment ability, particular in second- or third-tier cities,” he said.
“Even banks cutting interest rates and developers offering bigger discounts may not stimulate buying desire,” Lee added.
This pessimistic outlook comes after the sales of new homes in 23 major Chinese cities plunged by 33% y-o-y to 970,800 sq m (10.45 million sq ft) during the five-day holiday period, China Real Estate Information Corp (CRIC) said last week.
Chinese Premier Li Keqiang last Saturday warned of a “complicated and grave” employment situation, as the country imposed sweeping lockdowns to contain Covid-19 outbreaks. He instructed all government departments and regions to prioritise measures aimed at helping businesses retain jobs and weather the current difficulties, according to a statement issued on Saturday, which cited comments made by the premier during a nationwide teleconference on employment.
“Stabilising employment matters to people’s livelihoods. It is also a key support for the economy to operate within a reasonable range,” Li said, urging businesses to resume production with Covid-19 measures in place.
CRIC said Country Garden Holdings was offering projects in 100 cities at discounts through 65 online property sales events during the April 25 to May 10 period. The developer, based in the Guangdong province city of Foshan, released about 1,000 units at the starting price of RMB300,000 ($62,000), representing discounts of up to 45%.
The embattled developer China Evergrande Group was offering 2,000 completed homes and 8,000 uncompleted flats at discounts of up to 25% between April 20 and May 5, while Longfor Properties has released more than 300 projects comprising homes, parking spaces and commercial units, at discounts of as much as 25% between May 1 and May 15, according to CRIC.
CGS-CIMB Securities over the past two weeks hosted a virtual global marketing campaign for Chinese property stocks and targeted more than 60 investors from the US, Europe, the Asean countries, Hong Kong, China and Taiwan.
“Investors said that a series of supportive measures announced since December 2021 looked ineffective as far as solving developers’ liquidity issues were concerned,” said Raymond
Cheng, head of China and Hong Kong research at CGS-CIMB.
Currently, about 70 cities have rolled out easing policies, such as lower mortgage rates and faster loan approval procedures, to revive the ailing property market, which accounts for a third of China’s economic growth, as developers struggle to drive up sales.
Developers such as Logan Group, Zhenro Properties, Shimao Group Holdings, Sunac China Holdings and Zhongliang Holdings Group have been facing liquidity problems in the past one to two months, Cheng said.
Developers with liquidity problems were unable to raise funds due to lack of investors’ demand, he said, adding that some investors indicated that they would be hesitant to invest in the sector until they saw a meaningful recovery in sales.
“Overall, banks appear very selective and have only lent to state-owned developers or quality developers, but not to the developers that need refinancing,” Cheng added. — South