Sales at the nation’s 100 biggest home builders tumbled 46 per cent to 358.3 billion yuan (US$49.6 billion) in March from a year earlier, according to data published by China Real Estate Information Corp (CRIC), following an annualised 60 per cent slide in February. First-quarter sales fell 48 per cent to 779.2 billion yuan, it added.
March’s decline marked the 10th in a row of shrinking sales. It was almost double the figure a month earlier because of the low-base effect when new home sales in February hit the lowest level since 2019.
“Sentiment is still weak, demand is still lacklustre and the market outlook is still unclear at this point,” CRIC analysts said in the report published on Sunday. “We do not expect to see a significant turnaround in terms of supply and demand in the coming months. Developers will continue to face pressure on home sales.”
The industry has struggled to rebound from China’s “three red lines” policy unveiled in August 2020, a measure that shut the nation’s weakest borrowers out of the capital market. A liquidity squeeze has since triggered an unprecedented crisis as junk-rated developers defaulted on more than US$160 billion of bonds since then, according to a Goldman Sachs estimate.
“Demand in China’s property sector will be more polarised,” said Wang Xingping, a senior analyst at Fitch Bohua. “Pre-owned homes offer more room for price negotiation and lower cost of transaction compared to new homes.”
‘We can get through,’ says China Vanke boss as 2023 profits slump
‘We can get through,’ says China Vanke boss as 2023 profits slump
China Vanke, the second-largest by sales, last week said earnings tumbled by 46 per cent in 2023, the biggest slide since it went public in 1991. Longfor Group’s earnings almost halved, while Sino-Ocean Group suffered another year of hefty losses. Country Garden, once China’s largest developer by sales, said it would miss a deadline to file its annual results.
Bonds sold by China Vanke and Longfor lost their investment-grade quality, when they were downgraded into junk territory by Fitch Ratings last month.
Analysts at CRIC said new home sales in April could match or rise slightly from the level in March. Homebuyers became selective by picking projects undertaken by state-backed developers such as China Land Resources, as Beijing took steps to inject more liquidity and ease buying limits and mortgage rates.
The builder expressed optimism for a sector-wide stabilisation, echoing the People’s Bank of China’s remark last month that some “positive signals” have emerged in the country’s property market.
Property investments and sales in mainland China continue on a downwards trajectory despite Beijing’s efforts to inject liquidity and boost demand, but the rate of decline has slowed in a sign that the market is starting to stabilise, according to analysts.
In January and February, total property investment declined 9 per cent year on year to 1.18 trillion yuan (US$164.5 billion), according to data released on Monday by the National Bureau of Statistics (NBS). Investment in residential property fell 9.7 per cent to 882.3 billion yuan.
Overall investment slid 9.6 per cent in 2023, NBS said.
“The overall risk [in China’s property market] is manageable because the decline in investment is narrowing, which is a sign that the supply side is stabilising,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institute.
The competitive landscape of the property industry is changing, with companies that have healthier financials taking part in more projects than their smaller peers – another positive sign that the troubled market is improving, Yan said.
“With [banks] offering stronger financing support, property investment will likely gain more momentum later,” he said.
Property sales by floor area fell 20.5 per cent year on year in January and February, compared with a decline of 8.5 per cent in all of 2023, according to NBS. Meanwhile, sales value fell by 29.3 per cent year on year in the first two months, compared with a 2023 slide of 6.5 per cent.
The year-on-year decline in January and February sales is due in part to a high base last year, after the removal of Covid-19 restrictions released pent-up demand, pushing sales to record highs, said Chen Wenjing, director of market research at China Index Academy, a real estate research firm.
A longer Lunar New Year holiday and an increase in travel also slowed sales of new homes this year, she noted.
China’s economy rebounds at start of 2024, but property remains a ‘big problem’
China’s economy rebounds at start of 2024, but property remains a ‘big problem’
Additional data from the China Index Academy showed that total sales of second-hand homes in 25 major cities in China declined by 13.1 per cent in January and February by floor area, “significantly lower” than the rate of decline in the new home market in the same period, said Chen.
“Demand is recovering steadily overall, and the second-hand market is expected to maintain its momentum as we hope to see more demand being generated from homeowners wanting to trade-in and upgrade their homes,” she said.
China’s home prices continued to decline for the ninth month in February on a month on month basis, according to data released on Friday by NBS. Second-hand home prices dropped by 0.8 per cent month on month in first-tier cities, and 0.6 per cent in second- and third-tier cities over the same period.
“Most property-related activity worsened broadly and meaningfully in year-on-year terms in January-February, reflecting either unfavourable base effects or sequential weakness,” analysts at Goldman Sachs said in a note.
“Property activity has probably undershot underlying demographic demand amid the ongoing property downturn, but an increasing proportion of demand has been met by the large supply of vacant existing homes.”
By Liangping Gao and Ryan Woo
BEIJING (Reuters) -China’s fragile housing market opened this year with slower declines in property investment and sales, buoyed by government efforts to arrest a protracted downturn in the sector, however, analysts were wary of calling an end to the downturn just yet.
Property investment in China fell 9.0% year-on-year in the first two months of 2024, compared with a 24.0% fall in December 2023, National Bureau of Statistics (NBS) data showed.
Property sales by floor area logged a 20.5% slide in January-February from a year earlier, compared with a 23.0% fall in December last year.
Official property figures released last week showed the sector struggling to stabilise with home prices down 0.3% on a month-on-month basis in February, in line with a drop in January.
Hwabao Trust economist Nie Wen said real estate remains in a downtrend and that a smaller slowdown in investment is unlikely to change that with developers still struggling for cash flow.
“But the phase when property had the greatest negative impact on the economy should have passed, and it needs to be seen when the sector will bottom out,” Nie said.
China has been ramping up measures to reinvigorate its fragile property sector after a regulatory crackdown on developer leverage led to a snowballing liquidity crisis.
Authorities launched a so-called “whitelist” mechanism in January, channelling funds from state banks into local property projects identified by city governments as justifiable for financing support.
China last month announced its biggest reduction in benchmark mortgage rates to prop up the sector.
However, market participants mostly remain unswayed with home buying and financing and construction starts for real estate firms continuing to fall.
“The future of real estate depends on whether investment in the three major projects – affordable housing construction, urban village renovation and emergency public infrastructure construction – can offset the decline in property investment and the release of accumulated upgraded home buying demand,” said Nie.
Household loans, mostly mortgages, contracted 590.7 billion yuan ($82.08 billion) in February, according to Reuters calculations based on central bank data, after rising 980.1 billion yuan in January.
New construction starts measured by floor area plunged 29.7% year-on-year, after an 11.56% plunge in December 2023.
Funds raised by China’s property developers were down 24.1% on year after a 17.8% drop in December last year.
“More support for the property sector is still needed,” said economists at HSBC in a research note.
HSBC said further policies to remove home purchase restrictions in more cities and direct government support to boost public housing supply would help an eventual stabilisation in the sector.
($1 = 7.1970 Chinese yuan)
(Reporting by Qiaoyi Li, Liangping Gao and Ryan Woo; Editing by Sam Holmes)