China’s housing market is facing continued challenges despite government efforts to stimulate the sector, with prices showing signs of softness. JPMorgan economist Haibin Zhu believes that the market crash is not yet over, and predicts that home prices will not stabilize until at least 2025. Data from China Index Academy showed a modest increase in new home prices in 100 cities, while resale home prices declined from the previous month and year. Despite reports that China may implement a plan to lower homeowner borrowing costs through mortgage refinancing, analysts are skeptical that this measure will effectively boost homebuyer sentiment and consumption.
Winnie Wu, chief China equity strategist at BofA Securities, highlighted concerns about the potential impact of lower mortgage rates on banks and the financial system. She noted that reduced deposit rates to protect banks’ margins could negatively affect interest income on household savings. Additionally, JPMorgan’s Zhu expressed doubts about the effectiveness of the proposed mortgage refinancing policy, stating that it would mainly benefit existing homeowners rather than stimulating new home demand. Both analysts emphasized the need for the government to implement policies that create a positive feedback loop to address the current downward trend in the housing market.
Despite the challenges facing China’s housing market, some experts believe that a rate cut is not the best solution to revive the sector. BofA Securities’ Wu stressed the importance of avoiding measures that could further squeeze banks’ margins and instead urged the government to focus on creating policies that can generate a positive impact on the market. JPMorgan’s Zhu echoed these sentiments, noting that the mortgage refinancing policy may not be sufficient to boost new home demand and revive the housing market. Both analysts emphasized the need for a comprehensive strategy that can effectively address the underlying issues contributing to the current crisis in the housing market.
The overall outlook for China’s housing market remains uncertain, with indicators suggesting ongoing challenges amid government efforts to provide stimulus and support. While some measures, such as mortgage refinancing, are being considered, experts are cautious about their potential impact on boosting homebuyer sentiment and consumption. Analysts believe that a more holistic approach, focused on creating a positive feedback loop and addressing key issues affecting the housing market, is necessary to achieve sustainable growth and stability in the sector. Moving forward, policymakers will need to carefully consider and implement strategies that can effectively address the underlying issues and support the long-term growth and stability of China’s housing market.
