China’s top 100 property developers reported a 32.5 per cent year-on-year decline in contracted sales in January, according to Chinese real estate consultancy CRIC, suggesting that Beijing’s recent support policies have been more effective in rescuing cash-strapped home builders than stimulating demand.
Their January contracted sales declined to 354.3 billion yuan (US$52.5 billion) according to CRIC data. This figure represents a 48.6 per cent decline when compared with December 2022, as well as an 11.8 per cent drop when compared with February 2022, the Lunar New Year holiday month last year.
“Though the financing channel and environment for Chinese developers has improved since the end of last year”, they might still face pressure to repay their huge debts during the first three quarters of 2023, CRIC said in a report, adding that a recovery was still reliant on a rebound in sales.
In the short term, it is hard to see significant signs that the market will be warming up, as demand and supply will not revive soon, CRIC said. Overall transaction sales were, therefore, expected to remain low for some time, it added.
The January sales decline comes after the roll out of a series of support measures by Beijing in November. The so-called three arrows financing tools are aimed at helping major developers expand their financing channels, and at improving their capability to repay debts. Moreover, several local governments also rolled out support measures for homebuyers in December and January, such as lower mortgage rates and looser purchase restrictions.
The government of Yancheng city in southeastern Jiangsu province lifted the upper withdrawal limit for its housing provident fund to 1 million yuan from 600,000 yuan for eligible families purchasing homes in four districts. It also extended the maximum period of borrowing to 30 years from 20 years. Sales, however, continue to stay depressed in a gloomy market because of weak demand and purchasing power, CRIC said. Government policies aimed at stimulating demand have been less effective than measures supporting developers’ liquidity needs, rating agency Moody’s said
“The measures issued since November 2022 have improved funding for eligible developers, but demand-side measures have had less impact,” said Kelly Chen, a Vice-President and Senior Analyst at Moody’s. “We expect the decline of national contracted sales to narrow to 10 to 15 per cent in 2023, as sales volume is likely to fall at a lower rate than over the past 12 months because of a lower base of comparison.”
