© Reuters. FILE PHOTO: Residential and commercial buildings are located in downtown Guangzhou, China October 7, 2017. REUTERS / Bobby Yip / File Photo
By Liangping Gao and Ryan Woo
BEIJING (Reuters) -Shaken by a liquidity crunch among developers, China’s property market is expected to stay soft in the first half of 2022 before rebounding later in the year as policies aimed at encouraging buyers helps sentiment recover, a Reuters poll showed.
Having been a pillar of strength for the world’s second largest economy, the heavily indebted property sector faltered last year as Beijing mounted a deleveraging campaign that caught out several major developers, disrupting project deliveries and chilling buyer sentiment.
Aside from struggling with a rapidly cooling property sector, China has also encountered sporadic COVID-19 outbreaks that could deal a blow to factory output and consumption.
Average home prices are estimated to fall 1.0% on year in the first half, according to a Reuters survey of 17 analysts and economists conducted between Feb. 16-23. The estimate was unchanged from that of a Reuters poll in November.
For the full year, home prices are expected to rise 2.0%.
“Home prices are likely to rise if curbs are relaxed,” said Li Qilin, chief economist at Hongta Securities, adding the credit environment and regulatory policies on real estate have marginally eased since the beginning of this year.
“Property transactions in first- and second-tier cities, supported by their economic and demographic advantages, will be remarkably better than third- and fourth-tier cities.”
Authorities have unveiled a slew of measures to boost sales and sentiment, including giving developers easier access to escrowed pre-sale funds, requiring smaller down-payments for first-time home buyers, and allowing commercial banks to lower mortgage rates.
Analysts are more upbeat on housing demand and supply than in the last Reuters survey, though they said sentiment has not fully recovered and real estate firms still face financing pressure.
For demand, property sales are seen slumping 14.0% in the first half, narrowing from a 16.0% fall in November’s poll. Sales are expected to decline 7.5% for the full year.
Many respondents said policies regulating demand, especially genuine demand, will be loosened, but for now sellers were relying on offering discounts.
“Home buyers’ confidence has not yet been restored, and discounts are still a key marketing tool,” said Huang Yu, vice president of China Index Academy, a Beijing-based property research institute.
“First- and second-tier cities will see an increase in the scale of new home transactions, driving a structural rise in nationwide home prices.”
China’s housing minister on Thursday pledged to keep the real estate market stable this year and ensure genuine demand for homes is met.
Investment by real estate firms is expected to fall 2.0% in the first half and gain 1.5% for the whole year. Reuters previously forecast investment would drop 3.0% in the first half of 2022.
Property investment grew 4.4% in 2021, the slowest pace in 17 months, while real estate firms’ sales by area rose 1.9%.
“Real estate companies with capital pressure will move cautiously on land purchases and property investment,” said Lu Wenxi, chief analyst with property agency Centaline.
Daniel Yao, head of research for China at JLL, a commercial property services provider, expected authorities to issue more loans to property firms for project development and allow them to issue bonds more easily to relieve the liquidity pressure and stabilize the outlook.
Among the 17 respondents, 13 said China will delay rolling out a real estate tax pilot given the strain on its economy.
(For other stories from the Reuters quarterly housing market polls 🙂