China property: government likely to keep market support coming as April home sales tank, say analysts

CRIC expects 25 key listed developers to see April’s sales fall by an average of 17 per cent from the previous month
‘Given that property is a key pillar of the economy, we believe there are more supportive measures to come in the rest of the year,’ says analyst

China property

Pearl LiuandLam Ka-sing

Published: 7:46pm, 2 May 2023

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Beijing is likely to keep rolling out incentives to support mainland China’s property sector as April’s home sales look set to tank, according to analysts.

The preliminary sales in April for key Chinese developers “look so-so”, said Raymond Cheng, managing director of CGS-CIMB Securities, citing data from CRIC, a major real estate broker in China.

“Given that property is one of the key pillars of the Chinese economy, we believe that there are more supportive measures to come in the rest of the year if sales for the sector remain weak.”

CRIC expects 25 key listed developers to see April’s sales fall by an average of 17 per cent from the previous month. Guangzhou R&F Properties looks set to suffer a 46 per cent plunge in sales to 2.11 billion yuan, the largest drop among the homebuilders, according to data compiled by CGS-CIMB Securities.

Cheng attributed this to weak homebuyers’ confidence as a result of a stuttering economy and increasing jobless rate in China, as well as a high base in March. On an annual basis the increase is 35 per cent, which is misleading because of “a very low base” in April 2022 when the market was hobbled by stringent Covid-19 policies.

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China’s property industry, which is deemed too big to fail as it and linked sectors account for about a quarter of the nation’s economy, has been in recovery after Beijing took a slew of measures to bail out the sector. These included scrapping restrictions on home purchases in some cities, cutting mortgage rates and facilitating funding access to ease the liquidity squeeze on developers.

Notably, China’s central bank cut the interest rate for housing provident fund loans on October 1 last year, and it now stands at 2.6 per cent. In comparison, the average mortgage from commercial banks was about 4 per cent in April, according to the Beike Research Institute.

“It is a very important period this year for stabilising the housing market and not crushing buyers’ confidence, and thus we are seeing more measures to help the sector recover,” said Fion He, director of research at Midland Realty’s subsidiary in Shenzhen.

Local authorities have been getting in on the act too.

On April 30, China’s financial hub, Shanghai, declared buyers with more than one child can apply for an extra 20 per cent loan from their housing provident fund. Since it is a much cheaper loan than a commercial mortgage, the policy makes it possible for multi-child family homebuyers to get a bigger loan.

Previously, the amount a family buyer could borrow from a housing provident fund loan was capped at 1.2 million yuan (US$173,608). The maximum is now 1.44 million yuan.

Another tier-one city, Guangzhou, in the southern province of Guangdong, rolled out similar measures allowing first-time buyers with two or more children to get a 30 per cent higher loan from their housing provident fund.

Meanwhile, the financial performances of some major developers continue to raise eyebrows.

China Vanke reported “disappointing” first-quarter results with a 41 per cent year-on-year core net profit decline, Jefferies said in a report on April 29. It said it found the company’s “inactive new landbanking uninspiring, which may lead to continued sales underperformance.”

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