Despite numerous government stimulus and support measures aimed at bolstering the housing market in China, these efforts have fallen short of expectations. Haibin Zhu, chief China economist at JPMorgan, has warned that the housing market crash in China is far from over, with home prices not expected to stabilize until 2025 at the earliest.
Recent Trends in Prices
Recent data released by China Index Academy paints a bleak picture of the Chinese housing market. The average price for new home sales in 100 Chinese cities saw a meager 0.11% growth from the previous month, a significant slowdown from June’s 0.13% increase. In contrast, resale home prices experienced a 0.71% decline month-on-month. Year-on-year comparisons are even more grim, with both new and resale house prices plummeting by 1.76% and 6.89%, respectively.
Doubts About Proposed Measures
In an attempt to stimulate the housing market, China is contemplating a plan to lower homeowner borrowing costs by allowing refinancing on up to $5.4 trillion in mortgages. However, analysts, including Winnie Wu, the chief China equity strategist at BofA Securities, have expressed skepticism about the efficacy of such measures. Lower mortgage rates could lead banks to decrease deposit rates to maintain their margins and financial stability. This would ultimately impact interest income on household savings, potentially further dampening overall consumption in the economy. Furthermore, the proposed mortgage refinancing scheme is unlikely to significantly boost new home demand, as opined by JPMorgan’s Zhu.
The challenges facing China’s housing market are deep-seated and multifaceted, requiring more than just superficial measures to address. The inability of government stimulus efforts to spark a revival in the sector, coupled with the doubts surrounding proposed initiatives, paints a worrying picture for the future of the Chinese real estate market. It is clear that significant structural reforms and targeted interventions will be necessary to steer the housing market out of its current crisis and onto a path of sustainable growth.
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