Policy relief falls short for China’s home buyers

Buying an apartment in China became slightly easier in February, but credit conditions remained tight overall and the government does not appear keen to loosen them soon. 

Our measures of the mortgage rates and down payments that first-time buyers are paying dropped further from last year’s peak, but remained at levels that suggest the government’s policy bias has not shifted towards encouraging housing market activity. 

More than half of developers surveyed said first-time buyers were paying above the benchmark rate on their mortgage in February, compared to just 4 per cent at the end of 2015, when the government went full-bore on policy easing. 

Although some local governments have in recent months started easing restrictions on home buyers and developers, hopes for a nationwide relaxation of these constraints have so far been disappointed. 

The leadership is expected to say more about its approach to policy in 2019 at next week’s annual gathering of the National People’s Congress. The government may be willing to provide a little more flexibility to counter slowing economic growth and help local government and developer finances. However, a wholehearted embrace of the kind of stimulus which so successfully boosted activity during past cycles seems unlikely. 

Against this backdrop, sales activity is likely to remain weak. The FTCR Real Estate Index rose 14.7 points in February to 50. This is the first month in eight that the index has not been below 50, standing at a level suggesting the market is neither growing nor shrinking. 

The jump was unsurprising because China’s housing market always goes into hibernation for the lunar new year holiday (it jumped 19.2 points coming out of last year’s holiday break). However, the start to this lunar new year was relatively quiet, in part because developers outside of first-tier cities reported that sales fell again in February. 

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Developers across all city tiers under coverage said prices rose for the first month since August in February, while expectations for the coming month strengthened, again reflecting seasonal factors. With consumer views on house prices also appearing to stabilise in February, this could all suggest that the market is turning. 

However, with credit still relatively tight, and without further policy support from central and local authorities, conditions are not supportive of a meaningful recovery in this key driver of Chinese economic growth.

The FTCR China Real Estate survey is based on interviews with 300 developers in 40 cities. For further details click here. This report contains the headline figures from the latest Real Estate survey; the full results are available from our Database.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.



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