China sees steepest drop in real estate since 2006 | SURFACES REPORTER Realty News Update

Property Sales

In nearly 16 years, China has experienced a massive fall in its property sales for the first time as the COVID lockdown has cooled the demand regardless of more policy easing steps. The property sales by value in April fell 46.6 per cent from a year earlier, which is considered the biggest drop since August 2006. This has badly affected the world's second-largest economy. A report by SURFACES REPORTER (SR).  

Understanding the fall of real estate

As per Reuters calculations that are based on data from the National Bureau of Statistics (NBS) which were released yesterday, the property sales are sharply widening from the 26.17% fall in March. From January-April, the property sales by value fell 29.5% year-on-year, compared with a 22.7% decline in the first three months.

The Chinese authorities, earlier on Sunday, had announced a further cut in mortgage loan interest rates for some homebuyers to lure investors and analysts into reviving the sluggish property demand. However, the real estate sector has been in a severe slump since last year. The condition of the country’s major economic growth driver has been drooping after the authorities clamped down on excessive borrowing by developers, thereby scaring many would-be homebuyers who feared projects would not be completed.

With initiatives to include subsidies, reduction in mortgage rates and smaller down payments, more than 80 cities have now taken steps to boost demand since the beginning of the year. Unfortunately, the property position remained unwelcoming amid the COVID-19 curbs in big cities such as Shanghai, which is at present in its seventh week of lockdown.

Nomura chief China economist Ting Lu cited: “With no reopening in sight, a small cut to the lower limit for mortgage rates provides little support to potential first-time homebuyers.” Although the cut is expected to benefit, the positive impact is expected to stay for a limited time due to the uncertainty of COVID-19, an increase in the unemployment rate and a fall in income growth.

Reports suggest that Hong Kong’s Hang Seng Mainland Properties Index rose 1.2% in late morning trade, narrowing from a 3.35% gain at the opening. The broader market was down 0.2%. After a 0.7% gain in the first three months of the year, the property investment by developers around China fell 2.7% from a year earlier in January-April. Compared with the 2.4% decline in March, in April, property investment fell 10.1% year-on-year – the fastest pace since December.

In hope for a better market

New construction work measured by floor area plunged 44.19% from a year earlier – the fastest pace since January-February 2020; whereas it fell 26.3% in January-April from a year earlier, after a 17.5% decline in the first quarter of the year. In the hope to witness a profitable market in the second quarter, property developers are now revising investor expectations for full-year sales after a 50% plunge in the first four months, thereby understanding that sales recovery is the key to liquidity.

 

Image credits: Financial Times

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