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China Housing July 2023

China: Housing market weakens further in July

In January–July, the contraction in property investment steepened to 8.5% year on year from 7.9% in January–June. Indicators for commercial housing sales and real estate funding also deteriorated over the same period. Moreover, the sectoral confidence index slumped in July, and house prices for key cities fell in annual and month-on-month terms in July according to data compiled by Macrobond. Moreover, in August, Country Garden—one of China’s biggest property developers—skipped bond interest payments and announced it faced losses of over USD 7 billion for H1 2023.

Looking ahead, the property sector is set to remain weak despite a likely further loosening of property curbs, due to soft sentiment, indebted developers and oversupply.

On the effectiveness of the easing of property curbs, EIU analysts said:

“The likelihood of an unbridled market boom is […] minimal; the fact that the authorities seem determined not to inflate demand through monetised urban reconstruction projects, which hark back to the boom in 2015-18, will only eliminate such possibilities. Meanwhile, the [easing] measures may still be inadequate to relieve downward pressures at a time when popular perception of the housing market has decisively changed.” 

Nomura analysts were downbeat on the outlook:

“Markets still underestimate the aftermath of the significant collapse in China’s property sector, which accounts for more than half of global new home sales and home building. The chain reaction triggered by slumping new home sales may lead to a rising number of developers’ defaults, a sharp contraction of government revenue, falling demand for construction materials, declining wages of employees in both the property and government sector, weaker consumption, and faltering financial institutions. Beijing has already done some things to ease the tensions in the property sector, but it has been too slow and too little.”

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