China Property Sector
Short-term stimulus but recovery takes time
Event: News on possible measure to stabilize property market
According to the Economic Observer and other mainland media, People’s Bank
of China (PBOC), National Development and Reform Commission (NDRC)
and Ministry of Housing and Urban-Rural Development (MOHURD) met the
industry representatives in June. It might signal the government was
concerned the rapid slump of the property industry would post a risk of
recession to the general economy.
It was reported that the government was in the progress to assess the effect of
the cooling down of the property market to the overall economy. Since
property and relevant industries constitute a considerable portion to the
general economy, it is concerned that the rapid industry downturn would
produce a negative wealth effect to the population.
It was even quoted that new measures might possibly be launched soon to
stabilize the property market.
Our opinion: We believe an affordable and stable property price is essential to
the social stability, and thus we think the government is eager to see a steady
growth of property price, instead of frequent volatile price movement.
However, we guess the government may possibly use speech and rumour to
test the market response first at this moment. We think actual measures for
stabilizing the market might be launched at a later stage.
Moreover, the focus seems to be primarily on the risk of a recession to the
economy, rather than the difficulties faced by the developers. Therefore, we
believe the possible new measures (if any) would target on stimulating
property price and transaction volume, instead of assisting developers to
weather their problems such as loan curb and decreasing sales.
We believe the major challenges of the industry would be the lack of
confidence on buyers’ side, increasing supply and tightening loan policy. The
cumulative transaction value and volume for the first five months this year
dropped by 2.8% and 7.2% respectively
