China’s real estate sector has seen signs of stabilization, said Ibrahim Chowdhury, the World Bank’s acting Lead Economist for China. “The January figures of housing sales and home prices seem to point to incipient stabilization in the sector,” Chowdhury told China Daily in an exclusive interview. “This is consistent with the key message from the Central Economic Work Conference in December, which had a strong emphasis on maintaining economic stability.”
According to the China Real Estate Index System, the average new home price in 100 major cities that it monitors stood at CNY16,179 per square meter in January, down 0.01% from December. A total of 46 cities saw prices drop in January, compared with 58 cities in December. The price of pre-owned homes was CNY15,987 per sq m in January, down 0.08% from the previous month. Sixty-five cities saw prices drop in January, compared with 71 in December, according to the CREIS.
In the past few months, China’s policymakers have started to fine tune and adjust policies to provide some support to the real estate sector, including relaxing mortgage quotes, expediting mortgage approvals and loosening credit limits to healthy developers. “Going forward, China has some policy space to support the economy,” Chowdhury said. “I think that policymakers would also need to closely monitor financial liquidity. The real challenge is to do so without deteriorating balance sheets in the real estate sector and also in local governments.” Since real estate investment accounts for 20% to 25% of fixed asset investment (FAI), the sector plays a crucial role in the stable development of China’s economy.
“In our view, given the government’s focus on reining in financial risks in the sector, the growth in real estate investment will remain more subdued this year,” said Chowdhury. “While on the upside, infrastructure investment has rebounded in China, and manufacturing capacity will also likely to be robust this year.” According to the World Bank’s China Economic Update, the country’s economic growth is projected to moderate to 5.1% in 2022, compared with 8.1% last year. Although full-year growth is likely to slow down this year, the momentum will pick up, supported by a moderate easing of policy. “I’m sure that the People’s Bank of China would stand ready to provide liquidity when needed,” Chowdhury added. “But I think it’s important that policymakers continue with the de-risking and deleveraging efforts in the real estate sector.”
According to the central bank’s quarterly report, China’s new yuan-denominated loans totaled CNY19.95 trillion in 2021, up CNY315 billion from the previous year. The outstanding total social financing, which measures all funds moved from the financial sector to the real economy, increased 10.3% year-on-year, the China Daily reports.
