Too early to call a burst in China buying a recovery, analysts say By Reuters

By Casey Hall and Clare Jim

SHANGHAI (Reuters) – Property sales rose in some Chinese cities during the week-long National Day holiday after a raft of incentives were unveiled to support the market, but analysts cautioned it was too early to call a solid recovery as yet further stimulus could yet. be needed.

Just days before the Golden Week holiday kicks off on October 1, policymakers have announced an imminent cut in mortgage rates on existing home loans as part of a package of measures to stabilize falling sales and prices in the besieged sector.

China’s housing market has been in a slump since 2021 after a number of cash-strapped developers defaulted on loans, leaving behind large inventories of new homes and unfinished projects that hurt the broader economy and undermined trust.

During the holiday period, the number of home visits, which reflect the desire to buy a home, increased significantly, while home sales in many places increased by “varying degrees”, state broadcaster CCTV reported on Saturday.

More than 50 cities introduced policies to boost the real estate market, while nearly 2,000 projects from more than 1,000 real estate companies participated in promotions, the report said, citing the Ministry of Housing and Urban-Rural Development.

The southern Chinese city of Shenzhen was among the big cities that saw the biggest improvements in sentiment, according to local media, real estate agents and JP Morgan.

Between Oct. 1 and 3, the number of secondary-market homes sold through Shenzhen Centaline Property Consultants rose 233 percent year-on-year, and new home sales rose 569 percent, the agency said.

In Shanghai, requests for new apartments at many real estate projects have reached new highs, local media reported, with some projects seeing take-up rates as high as 80% to 90%.

In the first three days of the holiday period, 345 groups visited a state-backed China Resources Land development in suburban Shanghai, and 46 units were sold, with sales reaching 261 million yuan (37.2 million dollars), according to local media.

Real estate agent Leyoujia said its Shenzhen branch saw a 979 percent year-on-year increase in new home transactions from Sept. 30 to Oct. 6, while secondary market transactions rose 298 percent, Shanghai Securities News reported .

“We believe the positive sales momentum for these cities should suggest that property sales in other cities could also see some recovery in the near term amid strong policy support and improved market sentiment,” he said. said Raymond Cheng. head of China real estate research at CGS International Securities.

More comprehensive sales data for the Golden Week is expected to be released by private survey companies in the next few days. They will compare with a 17% drop in average daily home sales over the same period last year.

Golden Week is traditionally a peak period for new home sales in China, with developers offering promotions and launching new properties.

Cheng expected that China’s property sales could show positive growth in the fourth quarter.

But JP Morgan analysts warned that momentum remains weaker than when the economy reopened after the pandemic in the first quarter of 2023.

“For the next few weeks, a solid improvement in sales is more of a backlash after policy easing. To determine if the market bottoms out, November sales would be key,” they said in a note on Monday.

They also said that lower-tier cities, where the oversupply of properties is more severe due to declining populations and the poorer financial health of many local governments, have yet to see an uptick in demand.

China may need 3 trillion yuan ($427.50 billion) in financing to ease the housing glut in 80 major cities and may continue to rely on banks or its central bank to facilitate the program, it estimates UBS analysts.

“We expect the latest economic data to suggest continued weak momentum, although daily property sales in early October and consumer spending for the Golden Week may have improved,” UBS said in a note on Monday, adding that they expect an announcement of a sizeable tax package. in the following days.

($1 = 7.0176)