Despite efforts by the Chinese government to stimulate the housing market, JPMorgan economist Haibin Zhu believes that these measures have not been effective in boosting the sector. As a result, the housing market crash in China is far from over, with home prices not expected to stabilize until at least 2025.
Recent data released by China Index Academy indicates that the average price for new home sales in 100 Chinese cities only rose by 0.11% in July, down from June’s growth rate of 0.13%. Additionally, resale home prices saw a decline of 0.71% from the previous month. Year-on-year, both new and resale houses experienced drops of 1.76% and 6.89%, respectively, highlighting the ongoing crisis in the country’s housing market.
China is considering a plan to lower homeowner borrowing costs by allowing refinancing on up to $5.4 trillion in mortgages. However, analysts like Winnie Wu, chief China equity strategist at BofA Securities, are skeptical about the effectiveness of this measure. Wu believes that while lower mortgage rates may increase consumption, they could also lead to banks cutting deposit rates to protect their margins. This, in turn, could reduce interest income on household savings and have limited impact on stimulating new home demand, according to JPMorgan’s Zhu.
The challenges facing China’s housing market are multifaceted and require comprehensive solutions to address. With home prices expected to remain unstable for the foreseeable future, it is crucial for policymakers to carefully evaluate and implement measures that will not only support the housing sector but also promote sustainable growth in the long term. As the global economy faces uncertainties, China must navigate these turbulent waters with caution and foresight to overcome the current challenges in its housing market.