More transactions expected this year after supportive measures and market correction

Employees introduce a residential project to visitors during the 2023 Weifang Real Estate Expo held in Shandong province on Feb 10. (PHOTO PROVIDED TO CHINA DAILY)

Consensus is fast emerging among industry observers that China's property market, which had faced a variety of troubles over the last few years, is back on track, with recovery appearing possible this year.

"After a period of market correction, the property market will stage a strong comeback this year on the back of a number of supportive measures," said Chen Wenjing, director of research at the China Index Academy.

After a period of market correction, the property market will stage a strong comeback this year on the back of a number of supportive measures.

Chen Wenjing, director of research at the China Index Academy

Since last November, a series of measures targeting both supply and demand have been introduced. The work conference of national housing and urban-rural development held on Jan 17 also set the tone for this year's property market policies, which is boosting confidence, controlling risks and promoting transformation, Chen said.

Meantime, the nation's financial regulators have released a number of supportive measures, including differentiated credit support for homebuyers, facilitation of delivery of residential projects, enhanced cash flow of prime developers, guidance for their balance sheets toward a safe range, and improvements to the rental housing market.

All of which echoed the tone-setting annual Central Economic Work Conference in mid-December, experts said.

"We think the Chinese government will continue to implement measures to stabilize the property market, improve expectations, ensure the delivery of residential buildings, revive the housing market, support homebuyers' inelastic demand for housing, back the rising demand for upgraded housing, and meet the reasonable financing needs of property developers," said Pang Ming, chief economist with JLL China, a global real estate service and investment management firm.

Pang said he believed policies will be eased further until the physical market shows signs of stabilization and recovery. Industry leaders with solid fundamentals and developers are expected to sail through the tough times.

Mortgage interest rate cuts have been seen in a number of cities. At least 30 Chinese cities, including second-tier cities like Tianjin, Zhengzhou of Henan province, Fuzhou and Xiamen of Fujian province, Changchun of Jilin province and Shenyang of Liaoning province, had lowered their interest rates for mortgages as at the end of January, according to data compiled by the Zhuge Real Estate Data Research Center.

A real estate project is under construction in Huai'an, East China's Jiangsu province, on Jan 6. (HE JINGHUA / FOR CHINA DAILY)

The adjustments are a response to a joint statement made by the People's Bank of China, the country's central bank, and the China Banking and Insurance Regulatory Commission in early January. The regulators had allowed cities whose new home prices dropped both month-on-month and year-on-year for three months to decide if they would like to retain, reduce or remove local lower limits for interest rates on first-home loans in a phased manner.

Sun Duo, a 30-year-old employee of a State-owned enterprise, is one of the earliest beneficiaries of mortgage rate cuts in Zhengzhou. The capital city of Henan province in Central China said first-time homebuyers such as Sun can have their mortgage rates as low as 3.8 percent starting Jan 29, along with a down payment of 20 percent of the home price.

So, Sun and his wife took a home loan of 1.4 million yuan ($201,869) to buy a 125-square-meter apartment. Prior to the rate cut, they might have ended up paying 6,765 yuan per month as the old rate was 4.1 percent. That could have meant the family would have funneled about 40 percent of their monthly income into debt repayments. But, under the new policy, their monthly payment is down by 242 yuan, potentially saving up to 100,000 yuan over the loan tenure.

"Zhengzhou's new home and pre-owned housing price index dropped 17 months in a row, and it's necessary to boost the weak market confidence. A stable property market matters to the whole province's real estate market and fixed-asset investment, said Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center.

"There will be more cities with home loan adjustment requirements that will likely follow suit in the first quarter, and their lower limit for mortgage rates could be below 4 percent," said Chen.

She also noted that most of such cities would be second-, third- and fourth-tier cities, while first-tier and hot spot second-tier cities whose home markets have strong resilience will see the market stabilize.

Mortgage rate cuts would alleviate the homebuyers' repayment pressure, lower purchase cost, and encourage potential homebuyers to make those big decisions — whether or not to buy a home now.

"The lowered home loan interest rates are a positive move that can boost home sales, and we expect key second-tier cities to see sales rebound in the spring, reaching levels similar to those seen in 2021," Chen said.

Visitors gather information on housing projects during a real estate event in Jinan, Shandong province, on Feb 8. (PHOTO / XINHUA)

The annual Spring Festival holiday, which fell in the Jan 21-27 period this year, is usually marked by mass migrations for customary Chinese family reunions, rendering housing sales inactive. But, this year's holiday saw a mild recovery in the number of visits made by potential homebuyers to apartments in many first- and second-tier cities, according to the China Index Academy.

The market sentiment index in 50 key cities saw its greatest rise in January since 2022, showing homebuyers' confidence is returning, said Wang Xiaoqiang, chief analyst with the Zhuge Real Estate Data Research Center.

"The economic measures announced by the provinces of Yunnan, Jiangsu, Liaoning and Guangdong support home sales, stressing the importance of property market in regional economic development," Wang said.

Wuhan, capital of Central China's Hubei province, took the lead by easing its home purchase restrictions, which allowed existing homeowners to buy one more apartment. Industry experts believe countrywide market demand will likely get a boost as many more second-tier cities are about to make similar adjustments to their existing restrictions on home purchases.

Wang said she expects the market sentiment will further rebound in the following months, and lead to a spike in market transactions. "The spring of the real estate market is around the corner."

Hundreds of measures related to the property market have been introduced by both the central and local governments to safeguard the stable operation of the property market, said Chen Sheng, president of the China Real Estate Data Academy.

"But it may take some time for the normalization of the property sector, as the policy has to take full effect, homebuyers' confidence has to return, and property developers' investments have to rebound … all these need to recover step by step," Chen Sheng said. There will be additional policy fine-tuning and optimization throughout the market recovery, he said.

With the gradual recovery in both supply and demand, home prices in first-tier cities will likely stabilize in the first half, followed by stability in second-tier cities in the second half, Li said.

All said and done, the property industry remains a "pillar" of the economy. Hence, the policy stance has shifted to supporting the industry, said Pang.

For the longer term, the government will further promote the stable growth and sustainable development of the industry, abiding by the principle of "houses are for living in, not for speculation", Pang said.

wang_ying@chinadaily.com.cn