China’s housing market continues to struggle despite various government stimulus efforts. JPMorgan economist Haibin Zhu believes that these measures have been inadequate in supporting the sector. Home prices are still facing downward pressure, with projections suggesting that stability may not be achieved until 2025 at the earliest.
Recent data released by China Index Academy paints a bleak picture of the housing market. While new home sales saw a marginal increase of 0.11% from July, resale home prices witnessed a notable decline of 0.71% from the previous month. Year-on-year comparisons are even more worrying, with both new and resale properties experiencing significant price drops of 1.76% and 6.89% respectively.
China is reportedly considering a plan to allow refinancing on up to $5.4 trillion in mortgages in a bid to lower homeowner borrowing costs. However, analysts remain skeptical about the effectiveness of this measure. BofA Securities’ chief China equity strategist, Winnie Wu, points out that while lower mortgage rates could potentially boost consumption, it may lead to banks reducing deposit rates to maintain their margins. This, in turn, could impact interest income on household savings and have limited impact on overall new home demand.
The challenges facing the Chinese housing market are multifaceted and require comprehensive solutions beyond just financial stimulus. Structural issues such as oversupply, speculative investment, and demographic shifts need to be addressed to ensure long-term stability. Additionally, the government needs to focus on creating sustainable and affordable housing options to meet the diverse needs of its population.
The road to recovery for China’s housing market appears to be a long and uncertain one. While short-term measures like mortgage refinancing may provide temporary relief, they are unlikely to address the root causes of the crisis. A coordinated effort involving both governmental and private sector stakeholders will be essential in navigating the challenges and steering the housing market towards a more sustainable future.