Experts foresee local-level policy easing, predict rebound of realty stocks

China's residential property sector, which is undergoing a massive market adjustment, is expected to see more supportive measures from local governments to boost demand from homebuyers in the coming months, in accordance with the top leadership's guidance, said industry experts.

A broad recovery, they said, will likely follow after stocks of listed real estate companies get reevaluated by the market.

Numerous policies have been announced since the tone-setting meeting of the Political Bureau of the Communist Party of China Central Committee on July 24. At the crucial meeting, it was decided that property policies should be adjusted and optimized in a timely manner, so as to make good use of the targeted policies in different cities, considering the fundamental changes in the demand-supply situation in the real estate sector.

"Regulators, including the Ministry of Housing and Urban-Rural Development, the People's Bank of China and the National Development and Reform Commission, have been sending signals on easing of housing regulations, and local governments are also well-positioned to make more policy optimizations," said Zhang Dawei, chief analyst at Centaline Property Agency.

These gestures have inspired market imagination on further policy easing on a large scale, particularly in first — and second-tier cities, he said.

"All of the first-tier cities have made clear that they will provide great support to inelastic demand (from first-home buyers) and requirements for better living (of existing homeowners seeking to sell their homes to fund the purchase of better houses). Thus, we expect a fine-tuning of measures in top-tier cities at an accelerated pace," said Chen Wenjing, director of research with the China Index Academy.

According to Chen, future policy amendments may include lowering the down payment ratio, reducing home mortgage costs, optimizing the existing home purchase restrictions and more.

Apart from the support provided already to boost demand for homes, efforts are on to prevent risks, like ensuring properties under development will be delivered (to homebuyers) in due time and the settlement of risks amid a downtrend in the market, said Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center.

Meanwhile, Chinese mainland property giant Country Garden anticipated a loss of between 45 billion yuan ($6.22 billion) and 55 billion yuan for the first half of this year, the Hong Kong-listed real estate developer announced late on Thursday.

The loss will come amid a protracted sales downtrend in China's property market, a decline in the gross profit margins of listed real estate companies and a fluctuating foreign exchange market, Country Garden said in its filing.

Admitting it is facing the greatest challenge since its establishment, Country Garden said its capital flow is under pressure at the moment due to a deterioration of its sales and refinancing environment.

"As the overall industry is facing an extremely difficult situation, the company has made every effort to help itself out. But the market is yet to reach a recovery, and the restoration of (both) the (property) market and capital market confidence will take time, so the enterprise is under mounting pressure," said Country Garden.

Also, on Thursday night, China Evergrande Group, a prominent property developer with debt troubles, said in a financial report its total liabilities had reached 1.83 trillion yuan by the end of 2022, against total assets of 1.47 trillion yuan.

Some media reports said Evergrande will continue its efforts to guarantee the delivery of its property projects. Some 301,000 units were reportedly delivered to homebuyers last year.

As for Thursday, of the 62 listed property developers that have issued forecasts for their first-half performance, 38 warned of losses and 24 projected profits, according to data compiled by Wind Information.

With the implementation of various policies, their effects are manifesting; coupled with the subsequent recovery of fundamentals, real estate stock valuations will continue to improve, said Soochow Securities in a report.