A man walks past a residential complex of Chinese real estate developer Evergrande in Guangzhou, south China's Guangdong Province on September 17, 2021.
Noel Celis | AFP | Getty Images
Shares of Chinese property developers rose on Monday after major cities in mainland China unveiled easing measures to boost home buyer sentiment, following the central bank's stimulus campaign.
The Guangzhou city government said in a notice on Sunday that all restrictions on home purchases will be removed, effective Monday. Previously, migrant families had to pay taxes or social insurance for at least six months in order to buy up to two homes, while single individuals were limited to one apartment.
The Shanghai government also reduced the required tax payment period from three years to one year. The city also reduced the down payment percentage for first homes to about 15%, while for second homes to about 25%, higher than the country's average of 15%. The rules come into effect from Tuesday, according to the notice issued late Sunday.
The Shenzhen government has also eased purchase restrictions – which limited local families to two homes and single individuals to one – allowing buyers to purchase another apartment in certain areas. Migrant families with at least two children can now buy two homes, instead of one previously, according to the statement.
The Hang Seng Property Index on the mainland rose 7% on Monday, extending last week's gain of more than 30%.
Hong Kong listed shares of property developers such as Longfor Holding Group, Suspended lung characteristics, China's resource land Shares were among the biggest movers on the Hang Seng Index, rising by 12.4%, 12.7%, and 2.5%, respectively. China overseas land and investment and China Funky It rose 3.5% and 11.7%, giving up some of the gains it achieved in the morning session.
Mainland China's CSI 300 rose 8.5% on Monday, after the index posted its best week in nearly 16 years on Friday. The CSI 300 real estate index jumped more than 9%.
Easing purchase restrictions may help lift property sales in first-tier cities – such as Beijing, Shanghai and Guangzhou – by a greater margin than other cities, said Allen Feng, associate director at Rhodium Group, noting that similar measures have not worked in other cities. Other cities previously.
This view is shared by Gary Ng, Asia Pacific economist at Natixis, who points out that the impact is more limited in smaller cities “due to the higher level of inventory”. It is more likely to lead to some “stabilization” rather than transformation, Ng said.
The easing measures come in the wake of the central government's call last week to combat the real estate decline last week. According to the statement of the high-level meeting chaired by Chinese President Xi Jinping, “the authorities must work to halt the decline of the real estate market and stimulate a stable recovery.”
The People's Bank of China also lowered interest rates on existing individual mortgages by an average of 0.5 percentage points, and reduced the average down payment ratio for purchasing second homes to 15% from 25%.
Real estate once contributed more than a quarter of China's GDP, but entered a multi-year recession after Beijing cracked down on high debt levels in the sector in 2020.
Chinese policymakers are stepping up support to ease the financial burden on families and support the troubled real estate sector. But previous measures did not lead to any meaningful transformations.
Erica Tai, director of macro research at Maybank Investment Banking Group, said China may “need to accelerate its efforts to complete stalled or abandoned construction projects for pre-sold properties” in order to boost confidence among potential homebuyers and restore demand, noting that 4% have been completed. Only the floor space is under construction this year.
“Quick follow-up of fiscal policies” is crucial, and “if introduced soon enough” they will act as a tailwind to stimulate domestic consumption and stabilize the real estate sector, Nomura Bank analysts led by Jizhu Dong said in a note dated September 26.
Demand for homebuyers will slowly bottom out, and mortgage loan growth is expected to stop contracting soon, “but it will take longer, and measures of greater magnitude, to see a sharp overall recovery in the property market,” Natixis' Ng said.
