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China property
OpinionComment
Hao Zhou
Hao Zhou

The View | What China’s grim property market prospects mean for the economy

  • Measures meant to support the market do not appear to have taken effect, and recent news of property defaults shows headwinds remain strong
  • The importance of land sales, which have been sluggish, suggest the property sector will be a significant drag on economic growth

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A pedestrian passes near residential buildings at a Zhenro Properties Group development in the Jinshan district of Shanghai on February 24. Zhenro is asking bondholders for more time to pay back about US$1 billion in debt due to mature this year, citing liquidity pressure. Photo: Bloomberg
Hao Zhou
Since the Chinese authorities vowed to stabilise the economy at the central economic work conference, overall economic policy has shifted to easing mode. In the real estate market, many supportive measures reportedly have been rolled out.

Have these measures effectively helped the property market so far? Unfortunately, according to the latest data, the answer is probably “not yet”.

Let’s look at several different indicators to gauge the temperature of China’s housing market. First, new home sales in the 30 biggest Chinese cities declined by more than 25 per cent on a year-on-year basis in the first eight weeks of 2022, and there is little sign sales will pick up any time soon.

In addition, land sales in 100 large and medium-sized Chinese cities were less than half of the same period in 2021. As the volume of land sales is a leading indicator for property investment, the weak land sales at the beginning of 2022 point to a rather weak fixed asset investment outlook.

The trend in property prices is still soft. According to property price data released by the National Bureau of Statistics, the composite price in 70 medium- and large-sized cities has declined on a year-on-year basis. Notably, there is a big divergence between different tiers of cities.

For instance, new home prices in first-tier cities increased by 4.4 per cent year on year in January, the same as the previous month. However, new home prices in third-tier cities only grew 0.5 per cent, 0.4 percentage points lower than December 2021. Moreover, second-hand property prices in third-tier cities fell 0.7 per cent year on year while prices in first- and second-tier cities were still in positive territory.
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