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China Property Slump May Worsen Amid Covid Curbs: Analysts

The outlook for the property market is expected to remain bleak in the first half of the year and possibly the whole of 2022, as Covid outbreaks have hit both supply and demand

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China's efforts to revive the sector with lower mortgage rates, easier credit, subsidies and relaxed regulations have not worked yet, a report says.
Efforts to revive the sector with lower mortgage rates, easier credit, subsidies and relaxed regulations have not worked yet, a report says. File photo: Hector Retamal, AFP.


The severe downturn in China’s property market may intensify this year as prices remain flat and sales and investments in the sector have declined amid strict Covid-19 curbs despite policy easing, analysts say.

China’s property market, a pillar of its economy, has been hit hard since a clampdown on excessive borrowing by developers last year.

Officials in more than 100 cities have taken steps to boost demand this year via cuts in mortgage rates, subsidies and requiring smaller down-payments.

China’s financial regulators pledged on Tuesday to keep property sector credit growth stable and to support individuals affected by Covid-19 outbreaks, the central bank said in a statement. 

Official data showed that yuan loan growth tumbled in April while household loans, including mortgages, contracted by 217 billion yuan ($32.5 billion).

But the outlook for the property market is expected to remain bleak in the first half of the year and possibly the whole of 2022.

Average home prices are estimated to fall 1.3% on year in the first half, according to a Reuters survey of 13 analysts and economists conducted between May 16 and May 23. That compared with a 1.0% fall in a poll in February.


Home Prices To Stay Flat

For the full year, home prices are likely to be flat versus a forecast 2.0% rise in the previous poll.

“The current national housing inventory is in a high phase, and tier-three and four cities face large de-stocking pressure” due to demand slowing, analyst Ma Hong at Zhixin Investment Research Institute said.

“The turning point of home prices is likely to be in the third quarter, and home prices in tier-one and two cities may be the first to rebound.”

Analysts are also more pessimistic about housing demand and supply than in the last survey.

For demand, property sales are seen slumping 25.0% in the first half, widening from a 14.0% fall in February’s poll. Sales are expected to decline 10.0% for the full year.

Investment by real estate firms is expected to fall 5.0% in the first half and drop 2.5% for the whole year. Analysts previously forecast investment would drop 2.0% in the first half and gain 1.5% in 2022.


Covid Behind Gloomy Outlook

The gloomy outlook for property prices, sales, and investment was mainly due to frequent Covid-19 outbreaks.

The Chinese capital Beijing extended work-from-home guidance for many of its 22 million residents after the suspension of all dine-in services and indoor gyms, while Shanghai plans to lift a two-month lockdown in the first half of June.

The epidemic has had an impact on Shanghai’s property market, as developers and agents suspended offline operations and many residents were under quarantine, triggering a big fall in home sales, analyst Wang Xiaoqiang at property data provider Zhuge House Hunter said.

China on Friday reduced its benchmark reference rate for mortgages by an unexpectedly wide margin, a few days after a cut in mortgage loan interest rates for some home buyers, in a push to prop up its property market.

Analysts said authorities should introduce more policies targeting the supply side to restore market confidence amid China’s property crisis.

Only nationwide measures to relax curbs on financing for real estate enterprises and steps like shantytown redevelopment projects can stabilise the property market, Liu Yuan, head of research at China’s biggest property brokerage Centaline, said.


  • Reuters with additional editing by Jim Pollard

This report was updated with further details on May 24, 2022.




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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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