Residential towers under construction at the Jin Mao Palace project, developed by China’s Shanghai Jinmao Holding Group Co., Ltd., Thursday, Oct. 3, 2024.
Shen Qilai | Bloomberg | Getty Images
Chinese property stocks surged on Monday after Beijing rolled out more support measures over the weekend to boost the struggling industry.
Although Hang Seng Index On Monday, the Hang Seng Mainland Property Index fell 0.4% amid shocks, but rose more than 2%.
China Resources Land HSMPI had the largest increase, rising 7.6%.
Share prices of other property developers also rose sharply, including China Overseas Development and Yuexiu Property rose nearly 7% and 6% respectively.
The real estate sector was also the leader in mainland China’s CSI 300 index, rising nearly 5%, while the broader index rose 2%.
Stocks rose after China’s finance ministry outlined new policy measures aimed at stabilizing the struggling property sector.
Local governments will be allowed to issue more earmarked bonds to buy developers’ land and unsold housing stock, senior officials said at a much-anticipated news conference on Saturday.
Tommy Xie, managing director and head of Asia macro research at OCBC Bank, said in a report on Monday that the policy aims to regulate the balance between supply and demand in the land market, reduce idle land, and ease the financing pressure on local governments and developers.
Leonard Law, senior credit analyst at Lucror Analytics, told CNBC that this “represents another attempt by the government to absorb the country’s unsold housing inventory,” but said it’s unclear whether local governments have enough market incentives to address it. these questions.
Luo added that investor sentiment is likely to rise in the short term due to Beijing’s policy priorities, while warning that investors need to wait for more details on the implementation of the plan.
Goldman Sachs economists agreed, saying in a research note on Monday that incremental policy changes may have limited effectiveness in addressing real estate destocking “until implementation bottlenecks are resolved.”
Such obstacles include inconsistencies between local governments and developers on transaction prices, the report added.
Goldman Sachs economists said the real estate market’s drag on GDP growth may continue into 2025 as “construction activity catches up with leading indicators such as land sales and housing starts.”
Chinese President Xi Jinping hosted a meeting in late September and pledged to “curb the decline in the real estate market and promote a stable recovery,” according to a CNBC translation of the meeting.
Ahead of the high-level meeting chaired by Xi Jinping, China’s central bank announced a cut in mortgage rates for personal loans to ease the financial burden on homeowners.
China’s major cities have moved to ease a range of home-buying restrictions to stimulate demand.
China’s real estate industry still faces a massive inventory of unsold units and unfinished projects. Analysts insist China needs to clear out its inventory to truly turn around homebuyer confidence.
Deputy Finance Minister Liao Min added at a news conference on Saturday that authorities are also considering plans to lower property-related taxes. He did not disclose specific figures, noting that supporting real estate requires a variety of policies.
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