Home sales in China are likely to recover as some cities are now allowed to relax mortgage rate minimums for first-time homebuyers, aiding the country’s economic rebound. Cities whose new home prices fall for three months in a row on both a monthly and yearly basis are allowed to temporarily maintain, lower or remove the local lower limits on mortgage rates for first-time homebuyers, the People's Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) said in a joint statement. Also pointing to regulators’ increasing support for reasonable home buying demand, Ni Hong, Minister of Housing and Urban-rural Development, told Xinhua News Agency that down payments and mortgage rates for first-time homebuyers should be reduced wherever appropriate.
Thanks to the new mechanism, analysts said about half of the country’s 70 major cities are eligible to relax local first-time home mortgage rate minimums in the near future. Cheng Qiang, Chief Macro-economic Analyst at CITIC Securities, said 38 out of the 70 big and medium-sized cities are eligible for adjustable mortgage rate minimums. Reducing mortgage rates will help stabilize home sales and improve real estate development, Cheng said, adding that they play an indispensable role in expanding domestic demand by boosting investment in the real estate industry chain and unleashing consumer demand for appliances, furniture and decoration.
Once local new home prices rise three months in a row, cities should restore local mortgage rates to the national minimum, which stands at 4.1% at present. Yan Yuejin, Director of the E-house China Research and Development Institution, said the mechanism has extended a short-term measure launched in September into a long-term policy, giving local governments the flexibility to adjust mortgage rates to fit local market conditions. In September, the PBOC allowed cities with sustained home price declines to relax first-time home mortgage rate minimums until the end of last year.
“Based on the central government’s strong resolution to stabilize home prices, we believe this round of home price adjustments has bottomed out,” said Xu Xiaole, Chief Analyst with the Beike Research Institute. He added the transaction volume of pre-owned homes in the 50 cities Beike monitors saw 4% growth in December from a month earlier, the China Daily reports.
The 100 largest property developers in China ended 2022 with CNY7.6 trillion in sales, down 41.3% from a year earlier, according to a report by the China Index Academy (CIA). The top 100 home builders saw their market share shrink to 39.3% in 2022, down by 12.3 percentage points from the previous year. It is now the “survival of the fittest” in China’s property sector, as the gap between the top 10 and the bottom 50 developers on the list is widening, the CIA report said. The former made CNY310.7 billion per firm on average, versus CNY27.6 billion for the latter. Country Garden managed the most sales in 2022, raking in CNY464.3 billion by selling 57.16 million square meters of property. Poly Real Estate ranked second with CNY440 billion in sales, followed by Vanke, which generated CNY417.2 billion. Both firms sold more than 25 million sq m of real estate.
China Resources Land, China Overseas and Longfor also made the top 10, generating over CNY200 billion in sales. CIA said only 20 property developers recorded sales of over CNY100 billion in 2022, down from 41 the previous year. The number of developers making over CNY10 billion in sales also dropped, from 158 to 130 in 2022. CIA said favorable policies designed to rescue the stricken industry did not help the developers much and supply and demand in the market had not recovered significantly. “The country’s property market as a whole is still in the stage of deep adjustment, and the companies’ cash collection was hindered,” it added.
In December, the firm released another report that suggested home prices in 100 cities fell for a sixth consecutive month, declining 0.08% after falling 0.06% in November. Raymond Cheng, Director of China and Hong Kong Research at CGS-CIMB Securities, said the 16 measures rolled out by Beijing in November to support the property sector were “helpful but insufficient.” “They mainly focus on helping developers solve short-term liquidity problems but not sales,” he explained, as reported by the South China Morning Post.
