China’s housing market continues to face challenges, with JPMorgan economist, Haibin Zhu, expressing concerns that the sector’s woes are far from over. Despite various government stimulus efforts, the market remains lackluster and shows no signs of immediate recovery. According to Zhu, home prices are unlikely to stabilize until 2025 at the earliest.
Recent data from the China Index Academy reveals a modest 0.11% increase in new home sales prices across 100 Chinese cities, a slowdown from the previous month. On the other hand, resale home prices experienced a decline of 0.71% month-on-month. Year-on-year comparisons paint an even grimmer picture, with average prices dropping significantly, indicating a deepening crisis in the housing market.
Skepticism Towards Government Measures
China is said to be considering a plan to lower homeowner borrowing costs by allowing refinancing on a massive $5.4 trillion worth of mortgages. However, analysts, including Winnie Wu from BofA Securities, question the effectiveness of such measures in reviving homebuyer sentiment and overall consumption. While lower mortgage rates could potentially stimulate consumption, the implications on deposit rates and household savings income are significant. Wu warns that reduced deposit rates could erode interest income on savings, causing further economic strain.
Despite the proposed measure, JPMorgan’s Zhu remains skeptical about its potential impact on boosting new home demand. The mortgage refinancing plan may not address the core issues plaguing the housing market, such as declining consumer confidence and economic uncertainties. As a result, the market is unlikely to see any significant improvement in the near future.
China’s housing market faces a challenging road ahead, with no clear signs of recovery in sight. Government measures, while well-intentioned, may not be sufficient to address the underlying issues at play. As the sector grapples with softening prices and weakening demand, industry experts remain cautious about the market’s prospects. The future of China’s housing market remains uncertain, with long-term stability still a distant goal.