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China’s Housing Market Will Continue To Decline In H1 Before Accelerating In 2023

A Reuters poll predicts that China’s new home prices would decline further in the first half of the year before increasing in 2023 as mood improves as a result of the repeal of COVID-19 limitations and stimulus measures.

According to 13 analysts and economists surveyed by Reuters between February 17 and February 24, the first half of 2023 will see new home prices decline 1.0% year-over-year, which is a greater decline than the 0.5% decline predicted for similar time period in a November survey.

Prices are predicted to climb by 2.5% in 2023, which is a faster increase than the 1.0% increase predicted in the prior survey.

According to Lu Zhe, chief economist at Topsperity Securities, consumer income and expectations are slowly increasing, and in small cities, housing supply is outpacing demand.

With the economy improving in the second half of the year, price improvements will be driven by a comeback in demand, according to Lu.

Due to declining demand, increasing debt defaults, and falling sales and prices, the crisis-affected real estate market has been hindered.

Home prices increased for the first time in a year in January as a result of robust government support late in the previous year, reduced mortgage rates, and a policy reversal on the “zero COVID” containment measure.

But demand is still weak and hinders a long-term recovery. Analysts predict a sustainable recovery will start in the second half of this year.

According to Huang Yu, vice president of China Index Academy, slower population growth and market recovery-limiting factors like lowering earnings, predictions of falling home values, and stopped construction projects have not seen a fundamental turn around.

In the first half of the year, property sales are predicted to tumble 9.0%, which is a greater decline than the 5.0% loss predicted in the November poll. According to the study, economists anticipate a 1.5% decline in sales for the entire year 2023, which is more than the 1.0% decline predicted in the previous poll.
According to Xingping Wang, senior analyst at Fitch Bohua, “when the impact of COVID-19 fades, we think monthly housing sales will be smoother than the year before.”

However, Wang noted that it will take time for the market to reach its bottom and that sales will only gradually increase.

Markets are anticipating an easing of the limitations placed by officials in so-called first-tier cities on prices, acquisitions, and sales in order to control rising prices and speculation.

All respondents agreed that it was unlikely that the limitations in first-tier cities would be fully removed, but that there might be a slight loosening.

“Regulation easing in premier cities has a significant demonstration impact. In determining the scope and timing of policy easing in premier cities, we think the regulator would use greater caution “Wang from Fitch Bohua stated.

Experts have also predicted that China will gradually raise the percentage of newly constructed residences that are available for purchase on the market; some have even suggested that pre-sales may be eliminated.

This month, a number of Chinese provinces announced that they will begin testing a rule requiring developers to only display completed homes for sale. Mortgage boycotts last year were brought on by cash-strapped firms’ delayed construction.

11 out of 12 analysts that provided answers to the question anticipated improvements in housing affordability in the upcoming year.

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