China’s property market tumbles on developer debt crisis and weak buyer sentiment


People walk by residential buildings in the coal town of Hegang, northeast China’s Heilongjiang province January 2, 2020. Picture taken January 2, 2020. REUTERS/Ryan Woo/File Photo

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HONG KONG, May 26 (Reuters) – China’s property market, a key pillar of the world’s second-largest economy, has weakened sharply over the past year due to a government crackdown on excessive borrowing by developers and a COVID-19-induced economic downturn.

So far this year, more than 100 cities have taken steps to stimulate demand for home purchases through mortgage rate cuts, reduced down payments and subsidies. However, the outlook remains bleak as the government enforces strict COVID restrictions in dozens of cities, weighing on consumer confidence. Read more

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Problems in China’s property market are expected to worsen this year, with no house price growth seen for the full year, according to the latest Reuters poll. Read more

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Analysts said the national housing inventory is at a high level, especially in tier three and four cities that are facing heavy destocking pressure due to slowing demand.

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April property sales, in value terms, fell at their fastest pace in about 16 years despite further policy easing measures aimed at reviving the sector.

Further rate cuts this month aimed at easing the mortgage burden on homebuyers have left investors and analysts little convinced they could boost demand.

Fitch Ratings last month lowered its forecast for property sales by value, expecting them to fall 25-30% in 2022, from a previous forecast of a 10-15% decline.

Financial regulators have pledged to keep credit growth stable in the real estate sector and help homebuyers affected by COVID-19 outbreaks defer their mortgage payments, the central bank said in a statement Tuesday.

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Many private property developers tightened their belts in the face of falling sales and struggled to access financing. It would take many more months before regulators’ easing measures would have a significant impact on the market, they say.

Some developers are heeding Beijing’s call and accelerating the push into small-cap businesses such as real estate services and commercial real estate to reduce reliance on a high-leverage, high-revenue model responsible for the crisis of liquidity. Read more

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New construction starts fell 44.19% in April from a year earlier, the fastest pace since January-February 2020 at the start of the pandemic. Developers also slowed new construction as they tried to preserve capital, adding to the uncertainties facing potential home buyers.

Yuan loan growth fell in April as the pandemic rattled the economy and weakened credit demand, official data showed earlier this month. Household loans, including mortgages, contracted by 217 billion yuan, indicating a deep market freeze.

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Reporting by Clare Jim, Vijdan Mohammad Kawoosa, Liangping Gao; Editing by Sumeet Chatterjee and Kim Coghill

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