3 Key Takeaways:
- China’s new-home sales fell 17% YoY in June, improving from May’s 34% drop.
- Shanghai, Shenzhen, and Guangzhou’s policy easing boosted daily sales by over 30%.
- Economists predict more measures and funding to support China’s housing market.
What Happened?
China’s residential real estate sector showed signs of stabilization in June, with new-home sales from the top 100 developers falling 17% year-over-year to 439 billion yuan ($60 billion). This is an improvement from May’s 34% decline. Shanghai, Shenzhen, and Guangzhou implemented policy easing in late May, including slashing down-payments and offering cheaper mortgages.
As a result, new-home sales in Shenzhen and Guangzhou surged over 30%, while Shanghai saw an 11% increase in average daily sales for the first 25 days of June. Beijing also recently joined these tier-1 cities in policy relaxation.
Why It Matters?
The slowdown in the decline of home sales offers a glimmer of hope for China’s struggling economy, which is projected to miss its 5% growth target for 2024. The real estate sector’s performance is crucial as it significantly impacts overall economic health.
Despite the easing measures, the broader market remains in a slump, with annual property sales expected to drop by at least 15%, according to S&P Global Ratings and Fitch Ratings. The property crash continues to hinder growth, even as other economic indicators like industrial production have steadied.
What’s Next?
Investors should watch for new measures and additional funding from Beijing aimed at further supporting the housing market. Top policymakers have urged officials to be “creative and bold” in rolling out supportive measures. With many developers, such as Kaisa Group Holdings Ltd., still struggling with debt and liquidation risks, the market’s recovery is uncertain.
The continued decline in financing for developers, down 24% year-over-year in May, indicates ongoing challenges. Shares of Chinese developers have dropped over 25% since mid-May, signaling investor skepticism about a near-term turnaround.
