The problems in China’s residential property market are predicted to worsen this year as homebuyers remain wary, with economists now forecasting a decline in home prices in 2022 and a speedier fall in property sales than predicted earlier.

According to a poll of more than ten analysts and economists conducted between August 29 and September 2, new home prices ion China are anticipated to drop 1.4 per cent in 2022. Analysts predicted home prices to stay about the same for the year in a quarterly survey in May.

Property sales are expected to fall by 24.5 per centg in 2022, far more than the 10% drop predicted in the May poll.

Since the summer of 2020, when Chinese regulators decided to step in to slash excess leverage, the real estate sector has jolted from one crisis to another, resulting in some of the major property developers to default on their debts and find it difficult to complete projects. That angered homebuyers who issues threats of stopping payments for homes.   

The ailing industry is exerting a negative impact  on the prospects for the world’s second-largest economy, which barely avoided a second-quarter shrinkage because of widespread COVID-19 lockdowns. 

“Uncertainty over China’s growth prospects and concerns about project incompletion will largely drive weak homebuyer demand over the next 6-12 months,” said Daniel Zhou, an analyst at Moody’s in a research note.

“COVID-19 disruptions to business activity and sales execution will also dampen consumer sentiment, while buyers’ expectation of weaker property prices will delay property purchases.”

While the government has taken a number of measures to support the sector this year, analysts polled by Reuters said more was needed.

More than 200 cities have implemented measures to assist the real estate sector, such as cash subsidies and allowing for lower down payments on home purchases. On August 22, China’s central bank cut benchmark lending rates to help homebuyers save money.

“Multiple easing policy measures are needed to stabilise the property sector, such as relaxing curbs on purchase, re-selling and lending in second-tier cities,” said Huang Yu, an analyst at real estate research firm China Index Academy.

“China must also step up financing for some developers and ensure housing projects which have not yet been finished are delivered to buyers.”

Economists predict that home prices will rise next year, but sales will remain low.

According to a Reuters poll, new home prices are expected to rise 2.0% year on year in the first half of 2023, but sales are expected to fall 15% due to ongoing sluggish demand.

“The pace of recovery of the real estate market is still dependent on the pace of macroeconomic condition, Covid-19 control restrictions and the strength of policy support,” Yu added.

(Adapted from USNews.com)

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