China's Property Crisis Slows in 2024 But Downturn Yet to Ease

Efforts by the Chinese government to stabilize the country’s fragile housing market appear to have only partly succeeded.

2024 has seen slower declines in property investment and sales, but analysts say it’s too early to say when the downturn will end.

Property investment in China fell 9% year-on-year in the first two months of 2024, compared with a 24% fall in December 2023, National Bureau of Statistics (NBS) data showed on Monday.

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Property sales by floor area logged a 20.5% slide in January-February from a year earlier, compared with a 23.0% fall in December last year.

Official property figures released last week showed the sector struggling to stabilize with home prices down 0.3% on a month-on-month basis in February, in line with a drop in January.

Hwabao Trust economist Nie Wen said real estate remains in a downtrend and that a smaller slowdown in investment is unlikely to change that with developers still struggling for cashflow.

“But the phase when property had the greatest negative impact on the economy should have passed, and it needs to be seen when the sector will bottom out,” Nie said.

China has been ramping up measures to reinvigorate its fragile property sector after a regulatory crackdown on developer leverage led to a snowballing liquidity crisis.

Authorities launched a so-called “whitelist” mechanism in January, channelling funds from state banks into local property projects identified by city governments as justifiable for financing support.

China last month announced its biggest reduction in benchmark mortgage rates to prop up the sector.

Buyers unswayed, home starts down 30% on 2023

However, market participants mostly remain unswayed with home buying and financing and construction starts for real estate firms continuing to fall.

“The future of real estate depends on whether investment in the three major projects – affordable housing construction, urban village renovation and emergency public infrastructure construction – can offset the decline in property investment and the release of accumulated upgraded home buying demand,” Nie said.

Household loans, mostly mortgages, contracted to 590.7 billion yuan (just over $82 billion) in February, according to Reuters calculations based on central bank data, after rising to 980 billion yuan in January.

New construction starts measured by floor area plunged 29.7% year-on-year, after an 11.56% plunge in December 2023.

Funds raised by China’s property developers were down 24% on year after a 17.8% drop in December last year.

“More support for the property sector is still needed,” economists at HSBC said in a research note.

HSBC said further policies to remove home purchase restrictions in more cities and direct government support to boost public housing supply would help to eventually stabilize the sector.