China’s housing market has been grappling with ongoing challenges, despite various government stimulus measures. JPMorgan economist Haibin Zhu believes that these efforts have not been sufficient in supporting the sector. In fact, Zhu predicts that the housing market crash in China is far from over, and home prices may not stabilize until at least 2025.
Recent data from the China Index Academy paints a grim picture of the housing market’s current state. The average price for new home sales in 100 Chinese cities saw a modest increase of 0.11% in July, marking a slowdown from the previous month. Additionally, resale home prices experienced a decline of 0.71% month-on-month. Year-on-year comparisons show more significant drops, with average prices for both new and resale houses decreasing by 1.76% and 6.89%, respectively.
China is considering a plan to lower homeowner borrowing costs by allowing refinancing on up to $5.4 trillion in mortgages. However, analysts, including Winnie Wu from BofA Securities, are questioning the effectiveness of this proposed measure. Wu highlights that lower mortgage rates could lead banks to reduce deposit rates to safeguard their margins, potentially impacting household savings. Moreover, the mortgage refinancing initiative is unlikely to drive significant new home demand, according to JPMorgan’s Zhu.
With the housing market in China facing multiple hindrances and uncertainties, it is evident that there is no quick fix in sight. The combination of declining home prices, limited government support, and skepticism surrounding potential solutions paints a challenging landscape for the sector. As stakeholders continue to navigate these complexities, it is crucial to remain cautious and strategic in addressing the root causes of the market’s instability. Only with thorough analysis and targeted interventions can China’s housing market begin to see a path towards recovery and sustainability.
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