Shares of Chinese property developers soared on Monday following the introduction of significant easing measures in major cities across mainland China.
The moves, designed to rejuvenate homebuyer sentiment, come after the central bank implemented a slew of policy stimulus initiatives aimed at stabilising the country’s struggling real estate sector.
The city of Guangzhou announced on Sunday that it would remove all restrictions on home purchases, effective from Monday.
Previously, these restrictions included requirements for migrant families to pay taxes or social insurance for at least six months before they could purchase property.
The changes now allow these families to buy up to two homes without any additional prerequisites.
Shanghai reduced its required tax-paying period for home purchases from three years to one.
The down-payment ratio for first homes was lowered to around 15%, while second homes now require a 25% down payment, a substantial decrease from the previous requirements.
Shenzhen, too, relaxed its restrictions, allowing families to purchase additional homes based on certain conditions.
As a result of these easing measures, the Hang Seng Mainland Properties Index climbed by 8.36% during Monday’s trading session, extending the previous week’s gains of over 30%.
Developers such as Longfor Group Holdings and China Vanke saw significant gains, surging 19.1% and 12.89%, respectively.
Mainland China’s CSI 300 index jumped 6%, while the CSI 300 Real Estate Index rose by over 7%.
Real estate market shows signs of stabilisation
The easing measures are expected to benefit property sales in top-tier cities like Beijing, Shanghai, and Guangzhou.
Allen Feng, an associate director at Rhodium Group, suggests that while these measures may lift property sales in these cities, the effects could be more muted in smaller cities with higher inventory levels.
Natixis’ APAC economist Gary Ng believes that the impact in smaller cities will likely lead to stabilisation rather than a sharp recovery.
The recent policy changes follow the central government’s directive to halt the real estate market’s decline.
Authorities have called for “stabilising recovery” in the sector, a critical part of China’s economy, which previously accounted for more than a quarter of its GDP.
Central bank lowers mortgage rates
Along with easing purchase restrictions, the People’s Bank of China reduced interest rates on existing individual mortgages by an average of 0.5 percentage points. It also lowered the average down-payment ratio for second home purchases to 15% from 25%.
These moves come as Chinese policymakers continue efforts to support households and alleviate financial pressure amid the real estate sector’s prolonged slump.
Despite the government’s efforts, previous policy changes have not resulted in a significant recovery.
Maybank Investment Banking Group’s director of macro research, Erica Tay, notes that the government may need to accelerate the completion of stalled construction projects to rebuild confidence among potential homebuyers.
Long-term measures needed to boost homebuyer demand
While the new measures may temporarily boost demand, longer-term efforts are necessary to fully stabilise the market.
According to Nomura analysts, the swift implementation of fiscal policies is crucial for the sector’s recovery.
They suggest that if these policies are introduced in a timely manner, they could stimulate domestic consumption and create positive tailwinds for the property sector.
Natixis’ Ng believes that although demand will bottom out soon, it will take more substantial measures to see a sharp rebound in the overall property market.
In the meantime, mortgage loan growth is expected to stop contracting, albeit slowly.
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