China property shares gained5%this week with government intervention to ease houses crisis

China 's CSI 300 Real Estate index gained 5% this week and shares of Chinese property developers rose on Friday as investors expected authorities to announce more measures to stabilise the crisis-hit houses sector، with fresh data showing the fastest drop in new home prices in more than nine years and it remained unclear how any government intervention would be funded، with local governments already more than $9 trillion in debt.

Shares of Chinese property developers rose on Friday as investors expected authorities to announce more measures to stabilise the crisis-hit sector in China، with fresh data showing the fastest drop in new home prices in more than nine years.

Housing prices in China have fallen 25-30% from the peak

Housing prices in China have already fallen 25-30% from the peak and presented a dark cloud of economic uncertainty over China's financial system stability and continued risk for China's macroeconomic backdrop but if authorities do proceed with the plan to stabilise the crisis-hit houses sector، the new initiative might save the property market.

Waves of property market support measures over the past two years have failed to turn a sector which accounted for a fifth of economic activity in China at its peak and remains a drag on growth، but markets are betting on more decisive action such as purchasing millions of unsold homes.

News briefing on Friday afternoon about policies to ensure completion of housing projects

China's housing ministry، central bank، the National Financial Regulatory Administration and the Ministry of Natural Resources will hold a news briefing on Friday afternoon about policies to ensure completion of housing projects and investors were also waiting for measures to clear a growing stock of unsold apartments after Bloomberg News said on Wednesday the government was gathering feedback on a preliminary plan to get state-owned firms to purchase some of them.

China is seeking feedback from several provinces and government entities on the preliminary plan of buying millions of unsold homes to save Chinese Property market، while China has already experimented with several pilot programs to clear excess housing inventory with the help of state funding، the latest plan would be much larger in scale.

Hong Kong's Hang Seng Mainland Properties Index climbed 1.5% today

Hong Kong's Hang Seng Mainland Properties Index climbed 1.5% today that China 's CSI 300 Real Estate index was up 0.1%، having already gained 5% this week as markets look forward to many aggressive polices with supportive measures such as guaranteeing housing deliveries are expected.

The upbeat mood in the stock market contrasted with the harsh reality on the ground، highlighted by poor housing data on Friday and a Hong Kong court hearing of a petition seeking the liquidation of embattled developer Country Garden and the hearing was adjourned for June 11، while another major developer، China Evergrande Group was ordered to be liquidated in January.

New home prices fell for a tenth consecutive month in China

New home prices fell for a tenth consecutive month by 0.6% month-on-month in April، which was worse than a 0.3% fall in March and the fastest decline in China since November 2014 and a separate data set showed property investment in the first four months of 2024 falling 9.8% from a year earlier.

Property sales by floor area in January-April logged a 20.2% slide year-on-year، while new construction in China starts fell 24.6%. Funds raised by developers were also down 24.9% year-on-year، while of the 70 cities monitored for the housing data، 64 reported declines in prices last month، more than the 57 cities that did so in March.

Continued decline in property prices will intensify the wait-and-see sentiment in China

The continued decline in property prices will intensify the wait-and-see sentiment in China among would-be buyers and the Property industry adjustment is not yet over as it will take time for the market to recover.

Since the property market soured in 2021، triggering a series of defaults among developers، China has lowered interest rates and down payments، while most cities have eased or removed prior purchase restrictions and a whitelist developer funding programme for project completion is also struggling to get traction.

China to encourage people to replace their old apartments with new ones

Chinese authorities annoumced at a key political meeting last month to encourage people to replace their old apartments with new ones but it is off to a poor start as buying interest in second-hand homes remains tepid.

Many analysts believe the large stock of uncompleted residential projects and growing numbers of unsold new homes and second-hand properties listed for sales in China require government intervention to boost developers' cash flows and compensate for frail market demand for apartments.

The economy in China is powered more by industrial production than domestic demand

Ongoing worries about the overall strength of the economy، which is powered more by industrial production than domestic demand، are expected to keep many Chinese away from big spending decisions in the property market، but consumers، who still have shaky expectations of future incomes will continue to be cautious.

Goldman Sachs estimated this week that saleable housing inventory was valued at 13.5 trillion yuan ($1.87 trillion) at the end of 2023 and because some of their construction had not been finished، it would require 5 trillion yuan of capital investment to complete them and the property sector in China is unlikely to stabilize until the gap between housing supply and demand closes، as about 3.6 billion square feet of unsold housing inventory linger on the market، the highest level since 2016.