China homes sales continue to tumble as Beijing’s support measures fail to shore up weak sentiment in property market

Property sales at 24 major Chinese developers fell by 45 per cent year on year in January and 41 per cent month on month: CGS-CIMB Securities
The property sector is entering its off-season so the effects of new support measures launched by Guangzhou, Shanghai and other cities might not be ‘immediately obvious’, analysts at China Index Academy say

China property

Yuke Xiein Beijing

Published: 5:00pm, 1 Feb, 2024

Why you can trust SCMP

Despite a slew of measures rolled out by Chinese regulators recently to boost demand for property, developers are still struggling with weak sales and reported declines of more than 40 per cent in January, according to real estate brokerages.

Home sales at 24 major Chinese developers fell by 45 per cent year on year in January and 41 per cent month on month, CGS-CIMB Securities said in a report on Thursday. The brokerage cited data from China Real Estate Information Corporation (Cric), one of the largest real estate brokers in the country.

The decline came despite a low base, suggesting weak sentiment among homebuyers amid expectations that home prices will continue on a downward trajectory because of China’s slow economic recovery, the report said.

“January property sales … were well below market expectations of some 5 to 10 per cent decline,” Raymond Cheng, CGS-CIMB’s managing director, said in a note calling for stronger policy moves to prop up the sector, such as a liquidity injection of up to 2 trillion yuan (US$281.5 billion) through direct property purchases.

“This – if implemented – could really help solve developers’ liquidity issues and digest inventory levels markedly, which will in return improve market sentiment and homebuyers’ confidence.”

The muted numbers come even as Chinese policymakers scramble to support property developers and shore up confidence. Last week, the country’s financial regulators said banks could provide qualified developers with commercial property loans in order for the companies to repay other loans and bonds. Earlier the same day, the central bank also cut the reserve requirement ratio in a bid to encourage lending and to inject liquidity into the economy.

More fiscal support the catalyst to revive China consumption, housing market

Most distressed developers posted declines of 40 to 80 per cent year on year in January, which CGS-CIMB said was “weak and significantly below peers”.

Meanwhile, state-owned developers, such as China Overseas Land & Investment, China Resources and Greentown China, as well as privately owned developers with relatively sound financials, such as China Vanke and Longfor Group, outperformed, but these developers still recorded year-on-year sales declines of up to 30 per cent, Cric data shows.

The housing ministry introduced a “project whitelist” mechanism last month, asking provincial level governments to provide lists of local property projects that were fit for financial support. Chongqing in western China and Nanning in the southern Guangxi autonomous region were among the first cities to respond to the call this week, providing lists containing 314 and 107 projects, respectively.

Markets see a silver lining for China property in Evergrande’s liquidation order

On the demand side, provincial and city governments have been actively relaxing curbs on property purchases, with Suzhou, Shanghai and Guangzhou unveiling new rules to encourage homebuying recently.

“The property sector is entering its off-season in January,” analysts at China Index Academy, a real estate research firm, said in a note.

“Since Guangzhou, Shanghai and other cities are just rolling out their new measures, the effects are not immediately obvious, but we may expect market activity to bounce back after the Lunar New Year.”