Ample room remains to maneuver the market into virtuous cycle, experts say

China's real estate sector is expected to be further stabilized in the coming months thanks to supportive policy measures, which will also help to shore up overall economic expansion, experts said on Monday.

They also said China still has ample policy room for maneuvering the real estate market into a virtuous cycle, following the recent announcement of several new measures to lower home purchase costs and boost rational demand.

These measures include refunding taxes for those who purchase residential properties within a year of selling previously owned residential assets, as well as lowering interest rates for housing provident fund loans for first-time homebuyers. Moreover, some cities will be eligible to loosen the lower limit for mortgage rates for first-time homebuyers.

"The Chinese authorities have stepped up support for the real estate market in recent days, and the moves in lockstep have introduced a strong buttress to the market from multiple dimensions, which will help to boost market confidence," said Zheng Houcheng, director of the Yingda Securities Research Institute.

"As the Chinese economy faces the triple pressure of demand contraction, supply shocks and weakening expectations, it is critically important to restore market confidence and reverse the downturn in real estate development investment, so that the real estate industry won't drag down economic growth momentum," he added.

Considering that those measures were released in quick succession, Zheng predicted that new influential policies are likely to be introduced in the future.

On Monday, Hong Kong-listed shares of Chinese mainland property developers rallied on expectations of policy-measure effects shoring up their markets in the fourth quarter. Stock markets on the Chinese mainland are on a holiday break until Oct 10.

The stock price of Country Garden Holdings, the top gainer, jumped 8.79 percent.

Data from the National Bureau of Statistics showed that investment in property development declined 7.4 percent year-on-year during the first eight months to 9.08 trillion yuan ($1.28 trillion).

Commercial housing sales in terms of floor area totaled 878.9 million square meters, down 23 percent year-on-year, while in terms of value, sales fell 27.9 percent to 8.59 trillion yuan.

Xia Bin, chairman of the China Chief Economist Forum and a former counselor of the State Council, emphasized that real estate development investment accounted for a quarter of the total investment in China during the first half of the year, and the instability of the housing market has become an extremely important and urgent issue for China to settle, as it affects all aspects related to the stabilizing of the overall economy.

More policies should be perfected, and a certain adjustment time will be needed to settle the thorny issue, Xia said, adding that defusing risks hidden behind the real estate market and seeking stable economic growth are not only a short-term and urgent issue, but also a key and long-term one that affects the whole economy.

Zheng, with the Yingda Securities Research Institute, said the lower interest rates for housing loans is a key move to stabilize the sector, because that helps to ease cash flow pressure on homebuyers and therefore promotes new sales.

Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution, said that boosting demand remains a top priority in stabilizing real estate, since weakening spending on housing will have a negative impact on a range of key works in the sector, from controlling property developer debts and ensuring delivery of pre-sale housing, to preventing financial risks.

More policies to consolidate a firmer footing for the healthy development of the housing sector are also expected, according to analysts.

Chen Wenjing, director of research at the China Index Academy, predicted that local governments will adhere to the principle of "houses are for living in, not for speculation" to accelerate the implementation of region-specific housing policies to ensure the sound and steady development of the housing market.

Big cities will likely continue optimizing real estate regulations to gradually unleash the potential of market demand, while curbs on housing prices are suggested to be loosened in some cities, Chen said.

Wang Ying contributed to this story.