China property recovery will be slow and unevenly distributed amid income insecurity, distrust of debt-laden developers, analysts say
- A turnaround is under way, but analysts expect sales to improve only gradually throughout the year
- March sales rose sharply, but from a low base, and consumers remain wary of distressed developers’ ability to deliver
A turnaround in China’s housing market appears to be under way, but recovery will be slow and uneven amid income insecurity and consumer reluctance to trust indebted developers, according to analysts.
“We expect sales to improve gradually for the rest of the year, but we do not think sales will see a strong recovery due to concern over the long-term outlook for the property market and declining disposable income among households in China,” said Raymond Cheng, managing director of CGS-CIMB Securities.
Disposable income has declined because of higher unemployment, a lack of bonuses in many sectors after last year’s pandemic-ravaged economic performance and salary cuts for civil servants, Cheng said.
Developers’ sales in March rebounded 24 per cent year on year and 32 per cent month on month due to a low base and improved market sentiment, Cheng said, citing data from CRIC, one of China’s key real estate brokers.
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However, March sales increased between 50 and 100 per cent year on year among state-owned enterprises and developers that are in solid financial shape, while falling between 40 and 80 per cent for troubled developers, he added.
“The phenomenon could imply that homebuyers are still hesitant to buy properties from developers who have liquidity problems, as they may not be able to deliver the units on time,” Cheng said.
