Wealth Managers React To China’s Housing Stimulus Measures, IMF Upgrade (wealthbriefingasia.com) After the International Monetary Fund upgraded China’s growth forecasts in 2024 this week, wealth managers share their insights on the outlook and the potential impact of China’s latest housing market stimulus measures. The International Monetary Fund (IMF) has just upgraded China’s growth forecasts to 5 per cent from 4.6 per cent in 2024, after a strong first quarter, and to 4.5 per cent in 2025. It was also down to additional policy measures. China announced a number of initiatives to support the housing market in May, but China’s property woes remain a drag on growth, with some analysts saying that the measures fall short of what is required for a sustainable recovery. Key measures from the People’s Bank of China (PBoC), the country’s central bank, include lowering down payment requirements to 15 per cent for first-home purchases and 25 per cent for second-home purchases. In addition, the PBoC will provide 300 billion Chinese renminbi ($41 billion) in a relending programme for local governments to acquire properties and convert them into social housing. The central bank expects the programme to boost bank lending by 500 billion Chinese renminbi. The national floor for mortgage interest rates will also be removed. The market has divergent views on the effectiveness of these policies. There have already been various initiatives to help stimulate the property market but so far these have had a limited impact. Investors’ key concerns revolve around the implementation and whether the funding is sufficient to have a significant impact. Wealth managers RBC Wealth Management said it is a comprehensive policy package that addresses both the demand and supply sides, although it noted that many of the details regarding implementation remain to be seen, and it will take some time to ascertain whether the property market has bottomed. RBC WM believes that the initial funding should have an impact on improving market transactions, especially in Tier-1 and Tier-2 cities. “Over the past few years, it wasn’t that the market lacked demand, rather, market transactions were stagnant. Households with rigid demand were hesitant to buy property because they expected housing prices to continue to decline,” RBC WM said. The wealth manager thinks the policies sent a message to households that the government is trying to stabilise the market. Therefore, buyers with rigid demand may start to consider purchasing property. Based on RBC’s calculations, the initial funding should be sufficient to cover completed housing inventories under 70 square meters nationally, which could be the target of social housing projects, in its view. RBC believes that the impact of the first round of funding shouldn’t be underestimated, despite its seemingly small amount. It is not alone in its views. Sheldon Chan, portfolio manager for Asia Credit Bond Strategy, and Chris Kushlis, chief emerging markets macro strategist at asset manager T Rowe Price, think that the new effort, which shifts the focus to reducing inventories, rather than solely focusing on stabilising demand, represents a significant change in policy focus – a move in the right direction. “It is clear that the authorities aim to stabilise a sector that had previously experienced unsustainable levels of activity. They have also been striving to achieve this while minimising spending and maintaining some financial discipline over developers and local governments,” Chan and Kushlis said in a note. Consequently, support measures have consistently been under-scaled and are likely to continue in this manner. They anticipate an iterative process in which the authorities may be pushed to add incremental resources, combined with the market’s slow natural clearing process as excess supply gets worked down, leading to the stabilisation of the market at a low level over a six- to 12-month period. Chan and Kushlis think that property prices will remain under downward pressure for now. However, once the problems surrounding purchase price and sizing of unsold homes are resolved, property prices should begin to stabilise. “Even if the discounts are significant, finding a floor on prices will mark an important phase in this crisis and should gradually boost consumer confidence from its currently depressed levels,” they said. “A focus on clearing inventory to meet affordable housing goals means there should be less pressure on local governments to build new affordable housing from scratch. Consequently, the construction industry will continue to downsize as a relative share of the economy and employment, resulting in reduced commodity and building materials demand from this sector,” they added. HSBC Global Private Banking believes that China’s growth momentum will probably be underpinned by the recent macroeconomic and housing policy support, but it seems that the housing starts may need more time to find a bottom. “Recent support measures seem to be enough for some investors to dip their toe in both Mainland China and Hong Kong stocks lately, given low valuations,” Willem Sels, global chief investment officer at HSBC Global Private Banking and Wealth, said in a note. However, Björn Jesch, global chief investment officer at DWS, believes that India currently offers more opportunities than the Chinese market. "Chinese stocks are still burdened by the frequently low profitability of corporations,” Jesch said this week. Meanwhile, Dina Ting, head of global index portfolio management at California-based investment manager Franklin Templeton, believes that China shouldn’t be written off yet.
China flooded itself with millions of empty houses. It is flooding the world with cheap EV cars. Soon it will be flooding the world with cheap semiconductor chips.
I think the central gov. of China should just buy all of the excess supply of properties and then rent them out to potential buyers as a rent-to-own scheme. This would be lot more efficient than adjusting mortgage rates, down-payment and etc. and would get rid of the excess supply. There is no point implementing this with the local governments to have the local government purchase all of the houses. Local governments in China are extremely corrupt and are known to do their own thing ignoring the policies of the central government. All of these ghost cities and ghost town with the excess supply of properties are the direct result of the mismanagement of finance and property allocation policies or local governments due to greed and ignorance. What the central gov. can do however to recuperate the cost of purchasing these excess supply of properties is to charge the local governments a tax equivalent to the total purchase price. It is the local governments' fuck-up that created all these excess supply in the first place so it's only fair that they pay their share to clean up the mess. In the long-term though, if China wants to solve this property crisis, it needs to have stable growth in local population and local economy. To encourage growth of local population, the government can consider subsidization of childcare cost, more paid days off work for the new mother or both parents, and also more high-quality childcare facilities like public daycare centres like in many western nations. To stimulate local economy, the government can consider not just lower the mortgage interest rate but also the interest rate on business investment loans for companies who are starting out and expanding their operation so they can create jobs which would also increase demand for housing.
that's PBOC was trying to do, "the PBoC will provide 300 billion Chinese renminbi ($41 billion) in a relending programme for local governments to acquire properties and convert them into social housing." but for now, only a small scale.
I am saying the central government shouldn't trust the local government to carry out the acquisition and instead the central government should just acquire the properties directly themselves and then charge the local governments a tax to make them pay the central government back. If the central government entrusts the local government to purchase the properties, it will never get done or get done properly. I am sure there is going to be kickbacks, secret expropriation and then reselling them back to developers for profit all kinds of schemes. You will see. I hope these things don't happen but somehow they always do.
It's a house of cards (sorry for the pun). Nothing will solve the China housing crisis. You put poor people into your worst units and bad things will happen (even rent to own). They don't have the money for upkeep. The units are so poorly built, China is unable to refurbish them. Having seen what has happened to China's quality of products, is there ANYTHING you would buy from Temu?? Anything??? Food for thought...
no worse than the single family homes and the public housings we have in the distressed streets/cities, not everyone is wealthy.
The problem is this is NEW public housing that needs to be torn down (because it is unsafe garbage) before people can even move in...It's like a 20 year old "project", only new. No water, sewer, electric, elevator, heat...10 stories up!! And the building could collapse...