A construction site with residential buildings by Chinese developer Country Garden is pictured in Tianjin, China, 18 August 2023. REUTERS/Tingshu Wang/File Photo acquire license rights
BEIJING, Aug 28 (Reuters) – New home prices in China are unlikely to see growth this year, according to a Reuters poll, highlighting the intense pressures in the troubled real estate sector that are strangling the economy and holding policymakers back in the Fight to restore trust.
House prices are expected to grow 0% year-on-year, compared with a 1.4% increase in the previous forecast in May, according to a Reuters poll of 12 economists conducted August 16-25.
Confidence in the real estate sector, which accounts for a quarter of China’s economy, suffered last year after many homebuyers threatened to stop paying off their mortgages because developers were unable to build pre-sold housing projects due to tight liquidity and strict COVID-19 restrictions.
“The slowdown in China’s economic recovery and residents’ conservative consumption show that real estate market participants’ confidence has not yet recovered,” said Wang Xingping, senior analyst at Fitch Bohua.
Authorities have taken several measures to prop up the sector over the past year, including lower down payments, allowing larger mortgages and cutting mortgage rates. However, confidence remains low, in part due to ongoing liquidity problems among real estate developers and a general slowdown in the economy.
Real estate investment is expected to fall 7.7% year-on-year this year, much faster than the 4.2% drop forecast in the May survey, while home sales by square foot in 2023 are expected to fall of an increase of 5.0% on an annualized basis, down from 2.7% in the previous survey.
The world’s second-largest economy has seen a rapid loss of momentum since the second quarter following the initial recovery from the COVID crisis, impacted by weak domestic and international demand, rising unemployment and problems in the real estate sector.
“It is estimated that every one percentage point drop in real estate investment can cut the GDP growth rate by 0.1 percentage point,” said analyst Ma Hong of the Zhixin Investment Research Institute.
China observers are skeptical that the real estate sector could turn around in the short term, despite Beijing’s support measures.
Three Chinese ministries on Friday issued detailed rules allowing local governments to scrap the “no mortgage record” rule used to determine the status of “first home buyers”.
The biggest cities are expected to ease real estate restrictions in some suburbs, “but it will hardly keep the whole real estate sector from a downward spiral,” said Gao Yuhong, an analyst at CSCI Pengyuan Credit Rating Limited.
Seven out of 12 economists see affordability for first-time home buyers improving in the coming year.
However, ANZ economist Xing Zhaopeng said youth employment will be a major concern when buying a first home.
The government has suspended the release of data on youth unemployment, which has reached record highs, in part a symptom of regulatory action against big employers in real estate and other industries, analysts say.
(More stories from Reuters Quarterly Housing Market Surveys:)
Reporting by Liangping Gao and Ryan Woo; Additional reporting by Shuyan Wang; Edited by Shri Navaratnam
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