China’s policy easing since September has been “more effective” than past interventions to stabilise the struggling property market, but “structural divergences” mean additional support measures are needed for a sustained recovery, according to Goldman Sachs.
“Compared to earlier episodes, the ongoing policy easing appears more effective in boosting home sales and stabilising prices, despite limited impact on property investment and other construction-related property activity,” the US investment bank said in a report on Tuesday.
Price corrections over the three-plus years of the property downturn – during which second-hand home prices have declined by around 25 per cent from their peaks – were a key factor behind the “strengthened effectiveness” of recent policy measures, Goldman analysts said.
“The news, if true, should further reaffirm our view that Vanke’s near term liquidity risk should be largely solved,” said Raymond Cheng, managing director at CGS International. “Meanwhile, the move may also suggest that the long-awaited policy of buying unsold units from distressed developers by special bonds could be kicked off as a way to solve the sector liquidity problem.”
The sector’s crisis began in late 2020 when authorities launched a campaign to deleverage developers and deflate a housing bubble. Total new residential sales have declined by around 50 per cent from their peak in 2021. In response, Beijing in September rolled out its most aggressive stimulus package since the Covid-19 pandemic, including lower down payment ratios, reductions in mortgage rates and a plan to let local governments use special bonds to absorb land and housing inventory.
The policy blitz since September “enhanced the transmission efficiency” of housing easing measures at the margin, while also unlocking pent-up demand from buyers who had previously adopted a wait-and-see attitude, Goldman Sachs said.