China signals more support for real estate with a ‘big change’ in
Construction on a real estate project in Yantai, Shandong province, gets under way on July 8, 2023.
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BEIJING — China is changing its tone on the struggling real estate sector, paving the way for policy support.
Beijing’s crackdown on the once-hot property market has focused on financial risks of speculation and highly indebted developers such as Evergrande. Despite recent government efforts, home sales have slumped as the overall economy slows.
This week, a meeting of top Chinese leaders noted a “great change” in the relationship between supply and demand in the real estate market — and called for policy adjustments. That’s according to a CNBC translation of the Chinese readout of a Politburo meeting on Monday.
The readout also removed the phrase “houses are for living in, not for speculation” — frequently used in China as a mantra for a tight policy on the property market.
“For policymakers, the top property-related risk is no longer financial risk, but recession risk,” said Larry Hu, chief China economist at Macquarie.
“In an extremely top-down system like today’s China, the tone from the top is much more important than specific policy measures,” Hu said. He expects detailed policy announcements in the coming months.
The first time Chinese officials spoke of changes in real estate supply and demand was at a People’s Bank of China press conference on July 14, according to a state media report. Then, the PBOC official hinted at forthcoming property market policies.
This week, the higher-level Politburo meeting readout included similar language.
The statement reflects a “much clearer understanding about the seriousness of the situation,” said Qin Gang, executive director of China real estate research institute ICR. That’s according to a CNBC translation of his Mandarin-language remarks.
“This is a big change,” he said. He expects policies beneficial to the real estate market and consumption will come out in coming days.
The Hang Seng Property Development and Management Index rose by 9.78% on Tuesday. State media indicated relaxation in purchase restrictions could come later this year for China’s smaller cities.
More details needed
While Beijing’s tone is positive, Ricky Tsang, director of corporate ratings at S&P Global Ratings, said he’s watching for practical changes. Those include easing requirements for buying an apartment, lower down-payments and removing price caps.
He still expects property sales to fall this year and next, primarily dragged down by performance in less developed cities.
Residential property sales from July 1 to 20 dropped by more than a third from the same period last month – and one year ago, when China’s Covid controls were still in place, Tsang said, citing industry data published in state media. That’s based on floor space transaction volume.
Real estate investment has also fallen, down by 7.9% in the first half this year. It’s expected to remain low in the near term, according to the…
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