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China’s recent demonstration of support for one of its leading property developers, China Vanke Co., has injected optimism into the struggling real estate sector. However, investors are cautious and await more tangible measures from Beijing before fully re-engaging with the market. The week saw authorities expressing support for China Vanke and other major developers, signalling a potential turning point for the beleaguered industry.
Key Points:
- Need for Concrete Actions: Investors remain cautious and look to the Chinese government for decisive actions to reverse the prolonged property market slump. While the recent show of support for China Vanke led to a brief rally in a Bloomberg gauge of Chinese developers, investors desire more substantial measures, including cheaper funding and local governments taking over unfinished projects.
- Feedback Gathering Meeting: During a regular feedback gathering on Tuesday, developers, including Vanke, Longfor Group Holdings Ltd, Gemdale Corp (China), and Poly Developments and Holdings Group Co., met with policymakers. Developers suggested potential rule relaxations, such as easing limits on lending and pre-sale regulations for completed homes. However, regulators did not provide specific guidance during the meeting.
- Market Skepticism: Despite recent measures boosting sentiment, such as a surge in Chinese high-yield dollar bonds, investors remain skeptical about the sector’s sustained recovery. Concerns persist, with home sales declining, numerous developers facing defaults, and the property market’s substantial impact on China’s GDP.
- Call for Deeper Actions: Market participants call for more profound and scalable actions, including local governments taking control of large-scale projects, as developers face challenges accessing capital markets. The fate of China’s builders gained urgency after Country Garden Holdings Co., once the largest builder by contracted sales, defaulted on a dollar bond in October.
- Central Bank Governor’s Assurance: Authorities aim to allay concerns, with central bank Governor Pan Gongsheng stating that China’s property sector risks are under control. However, investors emphasize the importance of restoring homebuyer confidence through measures such as forming developer consortiums, providing cost-effective funding, and collaborating with state-owned enterprises.
- Scepticism Despite Policy Easing: While policymakers have implemented various measures to support the property market, including a 16-point plan and eased mortgage curbs, investors seek more comprehensive efforts. The recent market movements indicate that policymakers are keen on stabilizing the property market, but investors wait for sustained and impactful actions.
