China’s Property Investment Sees 9% Decline in First Two Months, Still Down but Slower than 2023

• 25 March 2024
• Property Focus
• 2147 Views

Property investment in China witnessed a 9% year-on-year decline in the first two months of 2024, a notable improvement from the 24% fall recorded in December 2023, according to data from the National Bureau of Statistics (NBS). Similarly, property sales by floor area experienced a 20.5% slide in January-February compared to a year earlier, showing a gradual slowdown from the 23% decline in December last year, according to National Bureau of Statistics, updated by Finance.yahoo on 18 March 2024.

Despite these modest improvements, the Chinese real estate market continues to grapple with challenges, as indicated by official figures showing a 0.3% month-on-month drop in home prices in February, consistent with the decline observed in January.

Hwabao Trust economist Nie Wen cautioned that the real estate sector remains in a downtrend, with developers still facing cash flow struggles. While acknowledging a smaller slowdown in investment, Nie emphasised the need to monitor when the sector will reach its bottom.

In response to the sector’s ongoing challenges, Chinese authorities have implemented various measures to stimulate growth. These include launching a “whitelist” mechanism in January to channel funds from state banks into local property projects deemed suitable for financing support. Additionally, China recently announced its largest reduction in benchmark mortgage rates to bolster the sector.

However, market participants remain cautious, with home buying, financing, and construction starts for real estate firms continuing to decline. Analysts underscore the importance of investment in major projects such as affordable housing construction, urban village renovation, and emergency public infrastructure construction to offset the decline in property investment and stimulate demand.

Household loans, predominantly mortgages, contracted by 590.7 billion yuan (US$82.08 billion) in February, following a rise of 980.1 billion yuan in January. New construction starts, measured by floor area, plummeted by 29.7% year-on-year, while funds raised by China’s property developers declined by 24.1% compared to the previous year. This is according to Reuters calculations based on central bank data, March 2024.

Economists at HSBC emphasised the need for further support for the property sector, suggesting policies to remove home purchase restrictions in more cities and direct government support to boost public housing supply as potential measures to achieve eventual stabilisation in the sector.

Overall, while there are signs of moderation in the property market’s decline, achieving stability remains a pressing challenge for China’s real estate sector.

• Business and Market
• Economy and Finance