Property woes loom large over China’s 2024 outlook: economist
- Hesitation among buyers and a lack of cash among developers is creating ‘ a negative feedback loop’
- Presold homes need to be delivered in a government-financed programme, Nomura’s Lu Ting says
“The real estate sector does show some signs of stabilising, but has it bottomed out? I don’t think we can make such a conclusion right away,” Lu Ting, chief China economist at Japanese investment bank Nomura, said in Beijing on Saturday.
Lu said that with delayed delivery of roughly 20 million presold homes – mostly in lower-tier cities where many private developers have been ensnared – there was a “negative feedback loop” between a public reluctance to buy new homes and a lack of cash among developers to build homes.
It also led to lower income for local governments, which rely heavily on land sales revenue, which in turn meant pay cuts for public sector workers and further drop in new home purchases, he added.
“Without cleaning up the mess [from undelivered presold homes], the real recovery of the property sector still faces a huge obstacle,” Lu said.
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Anger mounts as China's property debt crisis leaves flats unfinished
Beijing has implemented a series of stimulus measures to prevent the property market from further falls in the second half of the year, but sales have remained sluggish and prices dropped.