China’s real estate market is expected to rebound this year

By Liangping Gao and Ryan Woo

BEIJING (Reuters) – Shaken by a shortage of cash among developers, China’s property market is expected to remain weak in the first half of 2022 before rebounding later in the year as policies aimed at encouraging buyers help restore sentiment, according to a Reuters poll.

After being a mainstay of strength in the world’s second-largest economy, the heavily indebted real estate sector faltered last year when Beijing launched a deleveraging campaign that caught several major developers by surprise, disrupting project deliveries and dampening morale. buyers.

In addition to battling a rapidly cooling real estate sector, China has also encountered sporadic outbreaks of COVID-19 that could deal a heavy blow to factory production and consumption.

Average home prices are expected to fall 1.0% year on year in the first half, according to a Reuters survey of 17 analysts and economists conducted between February 16 and 23. The estimate remained unchanged from that of a Reuters poll in November.

For the year as a whole, house prices are expected to rise 2.0%.

“House prices are likely to rise if restrictions are eased,” said Li Qilin, chief economist at Hongta Securities, adding that the credit environment and regulatory policies on real estate have eased slightly since the month. beginning of this year.

“Real estate transactions in first- and second-tier cities, supported by their economic and demographic advantages, will be remarkably better than in third- and fourth-tier cities.”

Authorities unveiled a series of measures to boost sales and sentiment, including giving developers easier access to stranded pre-sale funds, requiring lower down payments for first-time home buyers and allowing banks businesses to reduce mortgage rates.

Analysts are more bullish on housing demand and supply than in the last Reuters survey, although they said sentiment has not fully recovered and property companies still face funding pressures .

For demand, real estate sales are expected to fall 14.0% in the first half, following a 16.0% drop in the November survey. Sales are expected to fall by 7.5% for the year as a whole.

Many respondents said policies governing demand, especially actual demand, would be relaxed, but for now sellers were relying on the discount offer.

“Homebuyers’ confidence has yet to be restored, and rebates are still a key marketing tool,” said Huang Yu, vice president of China Index Academy, a real estate research institute based in China. Beijing.

“Tier 1 and 2 cities will see an increase in the scale of new home transactions, leading to a structural rise in house prices nationwide.”

China’s housing minister pledged on Thursday to keep the real estate market stable this year and ensure that real housing demand is met.

Investment by property companies should fall by 2.0% in H1 and gain 1.5% over the year as a whole. Reuters previously forecast investment to fall 3.0% in the first half of 2022.

Real estate investment rose 4.4% in 2021, the slowest pace in 17 months, while property company sales by area rose 1.9%.

“Real estate companies under pressure on capital will act cautiously on land purchases and real estate investments,” said Lu Wenxi, chief analyst at real estate agency Centaline.

Daniel Yao, China research manager at JLL, a commercial real estate services provider, expected authorities to provide more loans to real estate companies for project development and make it easier for them to issue bonds. to relieve liquidity pressure and stabilize the outlook.

Of the 17 respondents, 13 said China would delay rolling out a property tax pilot given the pressure on its economy.

(For more stories from Reuters Quarterly Housing Market Surveys:)

(Reporting by Liangping Gao and Ryan Woo, Additional reporting by Jenny Su and Wang Shuyan; Editing by Simon Cameron-Moore)

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