China’s housing market has further room to weaken as efforts to revive the sector have not gone far enough to arrest a three-year slump, according to Goldman Sachs. The government may need to spend more than 15 trillion yuan (US$2.1 trillion) to fix the problems plaguing the sector.
The government needs to help developers with their funding conditions to complete pre-sold but unfinished properties to help ensure social stability, bring existing excess stock of homes to “normal levels” and mitigate annual contraction in property construction, the US investment bank said.
Fixing these three problems could help ensure social stability, stem further declines in home prices and rebuild consumer confidence, Hong Kong-based analysts including Lisheng Wang said in a report dated April 14. It will require substantial costs, well above the funding arrangements available thus far, they added.
“Despite several easing efforts, many property activity indicators have continued to worsen,” they said. “The housing sector has not yet reached the bottom of the L-shaped path we expect” and headwinds may remain strong in coming years, especially from lower-tier cities and cash-strapped private developers, they added.
China’s housing market crisis germinated from Beijing’s “three red lines” policy launched in August 2020, depriving weak developers of funding lifelines and triggering more than US$160 billion of junk-bond defaults, based on a Goldman Sachs estimate. Secondary home prices have slipped 20 per cent while new home construction weakened 16 per cent from their peaks, the latest report said. Source: SCMP
