Goldman Sachs analysts have warned that despite recent stimulus measures, risks for China's property sector still persist. While China's manufacturing and exports remain strong, the property market is still weak and far from an immediate turnaround. The recent government measures for the sector were positive, but the sector still faces challenges and the new funding measures announced by the government are insufficient to offset a sustained decline in the market. Additionally, China's industrial and manufacturing sector is experiencing signs of oversupply, with rising output and falling prices across industrial sectors. China's dominance in global manufacturing and trade surpluses are making its trading partners uneasy, and pushback from trading partners is expected to intensify in the medium term. China's stock markets saw a bounce due to the new stimulus measures, but doubts over the execution of the policy measures and trade tensions have caused recent declines.
China's latest steps to revive its struggling property market could pose risks to banks operating in lower-tier cities, according to a report by S&P Global [0efa75d6]. The measures announced earlier this month, such as cutting down payment requirements and removing the floor for mortgage rates, are expected to temporarily increase property demand but could also lead to an uptick in mortgage defaults. Property prices in smaller tier-three cities are expected to decline about 14% through the 2024-2025 period, potentially pushing some homebuyers into negative equity situations. The removal of the floor on mortgage rates will also give lenders less buffer to absorb potential losses when defaults occur [0efa75d6].
China Vanke, one of China's largest property developers, has secured a syndicated loan of RMB20 billion ($3.1 billion) from China Merchants Bank and other financial institutions. The loan is part of the government's efforts to support the property sector and stimulate investment [04c4c771]. However, despite commercial banks approving over RMB900 billion in loans for 'white list' projects, the actual amount invested by banks is not very high. The 'white list' program, which grants preferential treatment to certain property projects, needs to be enhanced. Property projects on the 'white list' do not guarantee direct loans from banks; risk assessments and control of non-performing loan ratio are required. The urban real estate financing coordination mechanism has yielded results, but local banks still have to consider head office quotas and wait for special head office approval, resulting in slower funds reaching 'white list' projects [04c4c771].
Shanghai has relaxed rules on buying property in the city, reducing the number of years required to live there before purchasing from five to three. The minimum down payment for commercial housing mortgages has also been reduced to 20 percent, and families with two or more children are now permitted to buy an additional home. This move follows similar actions taken by other major Chinese cities such as Hangzhou and Xi'an to reduce purchase restrictions for first-time buyers. The central government has also taken steps to address the crisis in the property and construction sector, including cutting the minimum down payment rate for first-time homebuyers and suggesting the government could buy up unused commercial real estate. No details were provided on the number of houses that would be bought. [dfad64ff]
JD.com's property unit, Jingdong Property, is postponing its listing plan in Hong Kong due to slumping sentiment for China's property sector. Last year, JD.com announced plans to spin off Jingdong Property and Jingdong Industrials and list both companies in the city, with a fundraising target of $1 billion for each firm. However, Jingdong Property is no longer on the list of firms that applied for an overseas listing, according to the China Securities Regulatory Commission. The property unit suspended the listing plan due to the current downturn in the mainland real estate industry. JD.com's industrial unit, Jingdong Industrials, is still moving forward with its IPO plan. Other tech giants, such as Alibaba, have also halted their spin-off plans. Jingdong Property develops and manages properties like industrial parks, while Jingdong Industrials provides supply-chain technology and services. [f3e52437]