China’s recent initiatives to boost the real estate sector are laudable, but analysts caution that the effects may not be immediate. S&P remains cautious about the current state of the property market, suggesting that the efforts may still be insufficient in addressing the underlying issues. Despite the government’s commitment to stabilizing the sector, it will take time for homebuyers’ demand and confidence to improve after years of market downturn.
One of the key aspects of the recent policy changes is the government’s concerted effort to implement multiple measures simultaneously. This demonstrates the seriousness and dedication of the authorities in addressing the challenges faced by the property market. However, the impact of these policies will depend on how effectively they can stimulate demand and restore confidence among prospective homebuyers.
Goldman Sachs’ Chief China Economist highlighted the inadequacy of the current measures compared to the estimated funding required to address the excess inventory and stabilize housing prices. While the steps taken by Beijing are commendable, more substantial funding and support may be necessary to achieve the desired outcome. Nomura’s Chief China Economist also emphasized the need for additional measures to rebuild buyers’ confidence and facilitate the delivery of pre-sold homes.
Official data indicates a decline in real estate investment, with new commercial floor space sales showing a significant decrease. This, coupled with lower-than-expected retail sales, reflects the challenges facing the property market. Household wealth heavily relies on property, and consumer spending is impacted by economic uncertainty. The prolonged delivery times for pre-sold apartments have further dampened homebuyers’ confidence and willingness to enter the market.
Housing prices in China have experienced a substantial decline from historical highs, with estimates suggesting a 25% to 30% drop on average. The significant number of pre-sold apartments awaiting completion underscores the funding gap of billions of yuan needed for construction and delivery. Resolving these issues is crucial to restoring confidence in the presale system and reviving the housing market.
Despite the government’s efforts to support the real estate sector, challenges persist in the recovery process. More extensive funding, efficient policy implementation, and rebuilding buyers’ confidence are essential steps to stabilize the property market in China. Patience and perseverance will be required to navigate the complexities of the current housing crisis and pave the way for a sustainable and robust real estate market in the future.
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