Top Chinese leaders call for halt to property market downturn

BEIJING – China aims to halt the downturn in its property market, top leaders said Thursday in a statement from a high-level meeting carried by state media.

The statement, which was issued in Chinese and translated by CNBC, said authorities “should work to stop the deterioration of the property market and stimulate a stable recovery.” It also called for “responding to the concerns of the public.”

Chinese President Xi Jinping chaired a meeting of the Politburo, the second-highest body of power in the ruling Communist Party of China, on Thursday, state media reported.

The statement said the leaders called for increased fiscal and monetary support, and touched on a range of issues from employment to population ageing. The statement did not specify a timeframe or scope for any measures.

“I see the messages coming out of this meeting as a positive step,” Chui Zhang, president and chief economist at Pinpoint Asset Management, said in an email to CNBC. “Forming a comprehensive fiscal package to address economic challenges takes time, and the meeting took one step in that direction.”

Stocks in mainland China and Hong Kong extended gains on the news to close sharply higher on Thursday. Hong Kong's China Property Index rose about 12%.

Real estate once accounted for more than a quarter of China’s economy. The sector has been in decline since Beijing’s 2020 crackdown on developers’ high debt levels. But the downturn has also eroded local government revenues and household wealth.

China’s broader economic growth has slowed, raising concerns about whether it can reach its full-year GDP target of around 5% without additional stimulus. Just days after the U.S. cut interest rates, the People’s Bank of China on Tuesday announced a series of planned rate cuts and support for property. Stocks rose, but analysts warned the economy still needs fiscal support.

Official data suggests the housing market’s downturn has slowed slightly in recent months. The value of new homes sold fell 23.6% in the year to August, slightly better than the 24.3% decline in the year to July.

Median home prices fell 6.8% in August from the previous month on a seasonally adjusted basis, according to Goldman Sachs. That was a modest improvement from a 7.6% decline in July.

“The stabilization of the housing market from bottom to bottom will be a prerequisite for households to take action and break the ‘wait and see’ cycle,” said Yue Su, chief China economist at the Economist Intelligence Unit, in a note. “This suggests that the policy priority is not to boost housing prices to create a wealth effect, but to encourage households to buy. This real estate policy aims to reduce its impact on the economy.”

Thursday’s meeting called for curbing housing supply growth, increasing lending to white-listed projects and cutting interest rates on existing mortgages. The People’s Bank of China said Tuesday that the upcoming cuts would reduce mortgage repayment burdens by 150 billion yuan ($21.37 billion) a year.

Although Thursday's meeting offered few details, it is significant for a country where political directives are increasingly set at the summit.

The high-level meeting reflects a “general policy” situation, as there has previously been no single meeting to summarize measures, Bank of China chief researcher Zhong Liang said in Mandarin comments translated by CNBC.

He noted that the meeting comes on the heels of positive market response to policy announcements earlier in the week. Zhong expects Beijing to step up its support, pointing to a shift from a focus on stability to action.

China will “work hard to complete” the country's economic targets for the full year, the statement from the meeting said.

That’s less aggressive than the Politburo meeting in July, when the statement said China would work to achieve those goals “at any cost,” according to Bruce Pang, chief economist and head of research for Greater China at JLL.

He said this showed that policymakers were looking for common ground between short-term growth and longer-term efforts to address structural issues.

Goldman Sachs and other firms have cut their growth forecasts in recent weeks.

The change in tone on economic targets suggests “the government may tolerate growth below 5%,” said Su of the Economist Intelligence Unit. “We estimate real economic growth to be around 4.7% in 2024, before slowing to 4.5% (a moderate upward revision to our previous forecast).”

“Political Bureau meetings on economic deployment are usually held in April, July and October,” she said.

“The earlier timing of this meeting, along with the focus on growth stability, reflects policymakers’ concerns about the current direction of economic growth.”

Analysts' initial reactions to the results of Thursday's meeting were mixed.

“The tide has turned, so be prepared for more proactive initiatives,” HSBC said. Capital Economics, meanwhile, said Beijing’s hint of stimulus did not make clear whether it would include broad-based fiscal support.

Fiscal stimulus is losing its effectiveness in China and is essentially a strategy to buy time to achieve longer-term goals, analysts at Standard & Poor's Global Ratings said in a report earlier this year.

Senior officials told reporters in the summer that the economy needed to endure necessary “pain” as it transitioned to higher-quality growth with greater high-tech industry.

— CNBC's Sonia Heng contributed to this report.