In Shenzhen, China, a view of high commercial and residential buildings was captured on March 9, 2016, reflecting the ongoing general economic slowdown in the country, while the property price and stock bubble continue to face risk.
Shares of numerous Hong Kong-listed Chinese property stocks surged to their highest levels in over a year, driven by China’s stimulus rally. The real estate sector emerged as the biggest gainer in the Hang Seng Index, with Longfor Group Holdings leading the charge by adding over 25%.
Other real estate developers also experienced significant gains. Shimao Group saw an increase of over 87%, while Kaisa Group jumped by 40.48%, both reaching their highest prices in more than a year. Similarly, China Overseas Land & Investment rose by 12.31% to touch its highest point since last September, and China Vanke surged by 39.6% to achieve its highest level since August 2023.
Hang Lung Properties and China Resources Land saw gains of 10.01% and 10.82% respectively. The broader Hang Seng Index added 6%, while the Hang Seng Mainland Properties Index surged over 14%. Mainland Chinese markets remained closed for the Golden Week holiday.
Over the weekend, major cities in mainland China introduced measures to enhance homebuyer confidence, following a series of policy stimulus initiatives from the central bank. Guangzhou’s city government announced that all restrictions on home purchases would be removed starting Monday. Shanghai’s reduction of the required tax-paying period became effective on Tuesday. Shenzhen also relaxed purchasing restrictions, allowing buyers to purchase one more apartment in select districts.
Gary Ng, senior economist at Natixis, told CNBC that investors are betting recent policy relaxations will lead to a home market recovery, aiding developers with sales and prices. However, he noted the challenges these expectations face, especially with inventory pressure in non-tier one cities. Ng emphasized that if home sales do not improve soon, the situation could revert to previous problems.
Morgan Stanley, in a note published Wednesday, mentioned that while these measures would help stabilize the property market, significantly lifting prices and reviving demand would be challenging. The investment bank’s Asia-Pacific economists highlighted that the ongoing drag from the property sector would leave a substantial shortfall in demand, keeping growth below target.
Previously, real estate accounted for over 25% of China’s GDP. However, the sector has faced a prolonged decline since 2020 due to Beijing’s crackdown on excessive debt. Despite increased support from Chinese officials to alleviate financial pressures on households and stabilize the real estate market, significant turnarounds have not yet been observed.
Gary Ng remarked that while there are more signs of stabilization, it does not change the fact that China’s real estate sector may have reached the twilight of its rapid growth era.
