Troubled realty market eyes slow, stable rebound as green shoots sprout on policies

Experts tracking China's debt-laden property industry generally adopt a cautiously optimistic tone, but one thing they unhesitatingly agree is that central and local governments' measures have laid a solid foundation for a market recovery, if not a fresh boom.

That, in itself, is remarkable because not so long ago, fears that an industry meltdown could affect the larger economy were widespread. But, beginning this year, various measures have helped stabilize the property market.

According to data from the Zhuge Real Estate Data Research Center, more than 210 Chinese cities adjusted their property policies 420 times from Jan 1 to Sept 25. Their steps ranged from offering subsidies to lowering down payments and reducing interest rate for first-home buyers. All were targeted at driving rational demand for homes for self-use.

By the end of September, a number of government departments had issued several new measures to lower cost of home purchases and boost demand, a move that, it is widely believed, would help lift market sentiment.

"All the measures would help activate the home market. It's almost certain that the second half would create a different situation, especially in first-tier cities," said Chen Sheng, president of the China Real Estate Data Academy.

"As policy relaxations consistently beef up market sentiment, we believe the most difficult time is behind us. Residential sales have bottomed out and the sector is likely on a curve of slow recovery," said Xie Chen, head of research with CBRE China, a commercial real estate services and investment firm.

The hoped-for recovery may take a comparatively longer time, but a month-on-month growth is pretty much on the cards, Xie said.

Lauding the central government's latest stance, officials and industry experts said more efforts are required to maintain the property market's stable and healthy development.

A report submitted to the 20th National Congress of the Communist Party of China stated that by adhering to the principle of "housing is for living in and not for speculation", the country will move faster toward building a housing system where multiple suppliers and various channels of support would encourage both rentals and homebuying.

"From the central government's perspective, the housing system implies both a market system and a government-subsidized system. And from the perspective of local governments, their policies should suit their own conditions and closely follow the guideline of 'housing is for living in, not for speculation'," said Xie of CBRE China.

On Sept 29 and 30, the People's Bank of China, the country's central bank, the China Banking and Insurance Regulatory Commission, the Ministry of Finance, the State Administration of Taxation and other departments concerned announced a number of macro-level policies to support the real estate sector.

For instance, the Ministry of Finance and the State Administration of Taxation decided to refund taxpayers who purchased residential properties within a year of selling previously owned residential assets. For its part, the PBOC announced a 0.15 percentage point cut to interest rate on housing provident fund loans availed to buy first homes. The country's financial authorities loosened the lower limit for mortgage rates for first-time homebuyers in some cities.

An S&P Global (China) Ratings report by analysts Zhang Renyuan and Ren Yingxue noted that these macroeconomic policies reflect the central government's resolve to support the steady development of real estate and maintain market stability, which can in turn bolster market confidence.

The policies are an extension of the "housing is for living in, not for speculation" principle, and aim to activate firm demand for residential housing as well as demand for improvements. They will help reduce transaction costs and lay the ground for a rebound in demand for real estate. At the same time, these policies also complement the regional "one city, one policy" stance on regulation, the S&P report stated.