Shares of Chinese developers experienced a significant boost early Tuesday following the commitment from China’s top leadership to provide additional policy support and adjustments to property policies. These actions suggest that easing measures may be implemented to assist the struggling property sector.
Both the Hong Kong and mainland markets witnessed an uptick in property developers’ shares. The Hang Seng Mainland Properties Index saw an impressive 10% rise, outperforming the benchmark Hang Seng Index, which only increased by 2.8%.
Country Garden Holdings recorded an 11% climb, while Longfor Group Holdings advanced by 19% in Hong Kong. In mainland trading, China Vanke added 5.7%, and Poly Developments & Holdings Group experienced a substantial jump of 7.6%.
In a meeting held on Monday, China’s Politburo, the country’s top decision-making body, acknowledged the new challenges faced by the economy, including weak domestic demand, struggling enterprises, risks in key areas, and a complex external environment.
This meeting followed data revealing that China’s economic growth had slowed to 0.8% in the second quarter compared to the previous quarter.
Another challenge confronting the world’s second-largest economy is the decline in home sales and home prices in recent months, following a brief uptick at the beginning of 2023.
Property Policies in Beijing to be Adjusted Promptly
Officials have announced that Beijing will swiftly adapt property policies to address the changing supply-demand dynamics. This move suggests a potential easing of measures to support the struggling property sector, which constitutes a significant portion of China’s economy.
According to data collected by E-house China Research and Development Institution, the number of listings for existing homes has seen a notable increase in 13 major cities, including Shanghai, Beijing, and Hangzhou. From December last year to May, listings for existing homes rose by 25%. Notably, Shanghai experienced an 82% surge in listings, while Wuhan saw a 72% increase.
Citi analysts have acknowledged this supportive stance, noting that it has surpassed their conservative expectations. They emphasize the substantial changes in property demand and supply dynamics.
However, some analysts are of the opinion that it will require more time and effort to strengthen the sector. Nomura economist Lu Ting highlights that there is no quick fix for the property sector. He does not anticipate Beijing to implement a large-scale stimulus program, similar to previous cycles, to stimulate the housing market.
In conclusion, Beijing’s decision to promptly adjust property policies reflects its recognition of the evolving dynamics in supply and demand. While this is viewed positively by some analysts, others caution that the property sector’s recovery will be a gradual process.