Too early to conclude China’s real estate sector has bottomed out, Nomura’s chief China economist Lu Ting says
Lived-in home sales in some of China’s largest cities are picking up, but prices remain subdued, with Japanese investment bank Nomura noting that the property crisis weighing on the economy for nearly four years is far from over.
In Shenzhen, a total of 2,390 second-hand homes changed hands last week, the most in more than three years, according to data compiled by the Shenzhen Real Estate Intermediary Association.
Similar trends have been observed in other major cities, including Beijing and Shanghai, where second-hand home transactions have increased in recent months.
However, lived-in home prices are a different story. In Shenzhen, prices have fallen by about 7 per cent in the first 11 months of the year, according to a price index from Centaline Property. The declines have been greater in Shanghai at about 10 per cent and more than 12 per cent in Beijing. At the same time, new home sales continue to decline.
“I think it’s a bit too early to conclude that China’s real estate sector as a whole has bottomed out and begun to rebound,” Lu Ting, chief China economist at Nomura, said on Wednesday.
Lu attributed the recent growth in secondary home sales to the release of pent-up demand, driven by continuous incentives aimed at attracting homebuyers back to the property market.
China’s property sector crisis, along with related industries that once contributed to about a quarter of the country’s gross domestic product, continues to drag down the economy, shrinking local government revenues and household assets.
New home sales have fallen by about half from their peak, straining some of China’s largest developers who are struggling to restructure their debts and complete pre-sold but unfinished homes. In the first 10 months of the year, new home sales totalled 6.7 trillion yuan (US$920 billion), a decline of 22 per cent from a year earlier.
State-backed China Vanke’s contracted sales for November declined 34.4 per cent from a year earlier to 20.1 billion yuan, widening from a 22.8 per cent drop in October, according to its latest update.
Country Garden Holdings, once the largest developer in the country, reported a 52.3 per cent decline in contracted sales for November to 3.01 billion yuan, widening from a 31 per cent drop in October. On Monday, chairwoman Yang Huiyan vowed to deliver unfinished homes and pay wages on time, especially to migrant workers.
China’s property market still suffers from an oversupply of homes and a lack of buyer confidence, according to S&P Global. “The ongoing decline in home prices has eroded not only the wealth of homebuyers but also their confidence,” the rating agency said in a report in October.
China’s major decision-making body, the Politburo, vowed earlier this week to boost domestic demand and stabilise the property and stock markets.