China’s housing market continues to face challenges despite various government stimulus efforts, according to JPMorgan economist Haibin Zhu. In a recent interview on CNBC’s “Squawk Box Asia,” Zhu expressed his concerns about the ongoing softness in the sector, stating that the housing market crash is far from over. He predicted that home prices would not stabilize until at least 2025, highlighting the deep-rooted issues plaguing the market.
The Current State of China’s Housing Market
Data released by the China Index Academy revealed that the average price for new home sales in 100 Chinese cities only saw a modest 0.11% increase from July, marking a slowdown from the previous month. Additionally, resale home prices experienced a decline of 0.71% compared to the previous month. Both new and resale houses saw average prices drop significantly from the previous year, with new homes falling by 1.76% and resale homes by 6.89%.
The continuous downward trend in housing prices underscores the challenges faced by China’s housing market. Despite efforts to stimulate demand and support the sector, the market remains deeply mired in crisis. The proposed plan to lower homeowner borrowing costs through mortgage refinancing on up to $5.4 trillion may not be sufficient to address the underlying issues affecting the market, according to analysts.
Analysts’ Perspectives on the Housing Market
Winnie Wu, chief China equity strategist at BofA Securities, expressed skepticism about the effectiveness of the proposed mortgage refinancing measure in stimulating homebuyer sentiment and overall consumption. Wu highlighted the potential impact on banks, noting that lower mortgage rates could lead to a reduction in deposit rates to protect their margins and ensure financial stability. This, in turn, could impact interest income on household savings, creating a ripple effect across the financial system.
JPMorgan’s Zhu echoed similar sentiments, stating that the mortgage refinancing policy may not be enough to revive the housing market. He emphasized that the policy primarily benefits existing homeowners and does not directly address the underlying issues driving new home demand. Zhu’s assessment raises questions about the government’s approach to tackling the challenges facing China’s housing market and the need for a more comprehensive strategy.
Challenges and Recommendations for the Housing Market
The current state of China’s housing market poses significant challenges that require a multifaceted approach to address. While government stimulus measures have been implemented, there is a growing consensus among analysts that additional interventions are needed to stabilize the market and stimulate demand. Suggestions for policy adjustments include creating a positive feedback loop to counter the downward spiral currently plaguing the market.
BofA Securities’ Wu emphasized the importance of avoiding measures that could further squeeze banks’ margins, noting that a rate cut may not be the most effective policy solution. Instead, Wu called for a more holistic approach that considers the long-term implications of policy decisions on both financial institutions and consumers. By fostering a supportive environment for new homebuyers and promoting sustainable growth in the housing market, policymakers can work towards a more stable and resilient housing sector.
In conclusion, the challenges facing China’s housing market require a comprehensive and strategic approach to address the underlying issues driving the current crisis. While government stimulus measures have been implemented, there is a need for additional interventions to stimulate demand and stabilize the market. By considering the perspectives of analysts like JPMorgan’s Haibin Zhu and BofA Securities’ Winnie Wu, policymakers can develop targeted strategies to support the housing sector and foster sustainable growth in the long term.