Contagion fears deepened further recently as Country Garden, the country’s largest private property developer, halted trading of some onshore bonds and struggled to address liquidity stress. And state-backed Sino-Ocean missed millions of dollars in interest payments.
Ren Zeping, an online influencer and economist, earlier this month called for more transparency in the housing market.
“We need a rational and accurate understanding of the contribution, problems and status of the real estate market,” he said.
“As a pillar industry, we cannot afford a hard landing in the property market. It matters in terms of economic growth, financial risks and job creation. Intensive efforts are needed to stabilise the property market.”
Policymakers have been loosening property policies since late 2022, with regulators easing funding restrictions and more cities lifting purchasing restrictions.
China’s prime decision-making body, the Politburo, said in late July that market supply-and-demand conditions have changed in the real estate sector, warranting policy adjustments.
This was widely seen as the strongest indicator from Beijing that property policies would be adjusted to focus less on preventing the market from overheating and more on avoiding a hard landing while mitigating the drag on China’s economic growth.
Beijing has also announced a slew of measures to revive the private economy and encourage consumption since late July.
In the 20-point plan to expand consumption, issued on Jul 31, the government said it would address the housing problems for new urban residents and young people who have increasingly felt priced out of the market.
However, Societe Generale expressed concerns that Beijing’s policies may not be strong enough to fuel a substantial rebound in the housing market.
“The more material ones are the relaxation of housing-demand restrictions in top-tier cities. However, at this point, any solution short of a bailout of large developers might still fail to stabilise housing any time soon,” the investment bank’s Wei Yao and Michelle Lam said in a research report on Tuesday.
If the capital city of Beijing does loosen home-purchasing restrictions, Wang Qiuyue intends on buying a large apartment.
The department head at a small, privately owned internet firm said he has not been able to because of family-ownership restrictions that are connected to residency.
Beijing is among China’s top-tier cities that have imposed the most rigid restrictions on property and automobile purchases.
“I don’t have the additional budget nor time to spend on anything but repaying the mortgage and raising my boy,” said Wang, whose son turned one in July. “But I am worried, very much so, about job prospects. If I were unemployed, everything would be ruined.”
In a second-quarter survey by the People’s Bank of China of 20,000 depositors in 50 cities, fewer households said they were planning to buy flats in the following three months, with the proportion dipping to 16.2 per cent from 17.5 per cent in a first-quarter survey.
Meanwhile, more households expected property prices to fall in the next three months, with the proportion up to 16.5 per cent from 14.4 per cent, the survey found.
Yu Qian, a 26-year-old freelance English teacher, has moved with her husband and newborn to Zhengzhou, the capital of central China’s Henan province, from Zhumadian, a third-tier city nearby, seeking more lucrative work.
The small family will not be buying a home for now. They are currently renting a 90sqm (968sqft) flat for 2,100 yuan (US$290) a month. The unit’s sale price is listed at 1.08 million yuan.
“We are also considering buying an apartment in Zhengzhou, but I think property prices will very possibly drop next year.
The liquidity and preservation value of real estate are much worse than before,” Yu said. “All of my friends who bought an apartment over the past couple of years have regretted the decision.”
Cai Fang, a senior researcher with the Chinese Academy of Social Sciences, flagged risks stemming from insufficient confidence in residential consumption, warning that the situation could turn chronic from even a short-term aversion to buying property, if not timely fixed.
“Regarding the possible new norm involving residents’ economic activities, new ideas are required in macroeconomic policies, with stimulating consumption for starters,” Cai said in an article published by China Finance 40, a leading think tank, on Monday.
Lin Suzhen, a self-employed man in his mid-forties, is still willing to consume as long as he has options.
“I won’t cut my consumption budget. [I have] no plan to buy a big apartment, as it is too expensive. Overseas tourism is not easy, so I travel domestically, and that is it.
If Beijing can loosen the auto-plate restrictions and grant me a quota, I would, without hesitation, spend 400,000 yuan to buy a car,” said Liu, who has participated in the city’s car-plate lottery since 2012, a year after Beijing rolled it out.
Calling the stimulation of residential consumption the “most pressing” policy target, Cai said the government should take measures “by all means” to increase residential income.
The government should, he said, also allow rural migrant workers to become residents with urban household registration – known as hukou – to unleash new demand.
In 2019, China’s central bank said housing accounted for nearly 70 per cent of urban household assets in China – at a time when it was still widely viewed with potential investment value across the country, and as an asset to grow wealth.
Eli Mai, a sales director with a foreign company in Guangzhou, saw the value of his two flats rise from 3.8 million yuan in 2016 to 6.4 million yuan in 2017. They peaked at 8 million yuan in 2021 and are now worth less than 7 million yuan.
“No one knows how the economy will be in the future. Under such circumstances … you should not invest rashly,” he said.
“Now, most Chinese ordinary people who own housing feel that their wealth is shrinking dramatically. That must be profoundly affecting the economy and the spending,” Mai said.
Central bank data showed that outstanding mortgage loans shrank by 0.7 per cent at the end of June to 38.6 trillion yuan, compared with a year earlier.
The weak demand also dragged down the new loans issued by banks. In July, the figure stood at 345.9 billion yuan, much less than the market had expected. Medium- to long-term loans to households, which are largely mortgages, fell by 67.2 billion yuan.
Li Wei, a freelancing copywriter in Shenzhen, has to repay 18,000 yuan each month for three apartments bought in the late 2010s when the property was still booming and buyers were betting on persistent price hikes.
“The mortgage is now a heavy burden for me,” said the 34-year-old with a two-month-old, as current market prices have fallen below what she paid.
Adding to her stress, she has not yet been paid for freelance work done this year.
“Overdue payments are common in the film industry,” she said. “The production company delayed payment to the advertisers, which then delayed payment to us.”
This article was first published on SCMP.
Source: CNA
