The housing market in China has been facing ongoing challenges, despite various attempts by the government to provide stimulus and support. JPMorgan economist, Haibin Zhu, has highlighted the fact that these measures have not been successful in bolstering the sector. In fact, he predicts that the housing market crash is far from over and that stability in home prices may not be achieved until 2025 or later.
Recent data from the China Index Academy paints a bleak picture of the situation. The average price for new home sales in 100 Chinese cities saw only a slight increase of 0.11% in July, marking a deceleration from the previous month. On the other hand, resale home prices experienced a notable decline of 0.71% compared to the previous month. Year-on-year comparisons are even more alarming, with average prices dropping significantly for both new and resale houses.
In light of the persisting housing market crisis, China is reportedly considering a plan to lower borrowing costs for homeowners by enabling refinancing of up to $5.4 trillion in mortgages. However, experts remain skeptical about the potential impact of this measure. Analysts, such as Winnie Wu from BofA Securities, caution that lowering mortgage rates may have unintended consequences. While it could stimulate consumption to some extent, it may lead to banks reducing deposit rates and impacting interest income on household savings.
Despite the proposed refinancing initiative, there are concerns that it may not be sufficient to revive demand for new homes. JPMorgan’s Zhu has expressed doubts about the effectiveness of this measure in boosting homebuyer sentiment and overall consumption in the housing market. The challenges facing the sector appear to be deeply entrenched, requiring more comprehensive solutions to address the root causes of the ongoing crisis.
The woes in China’s housing market seem far from being resolved, with continued softness and instability expected in the coming years. While government interventions and stimulus efforts have been made, their impact remains limited. It is evident that a more holistic approach is needed to address the underlying issues and restore confidence in the market. Only time will tell whether the sector can overcome its current challenges and regain stability in the long run.
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