Commentary
Modest good news in China’s long-standing property crisis has emerged. However, it would be unwise to make too much of it.
Analysts at Fitch Ratings, the credit-rating agency, have highlighted how the property crisis, though continuing, is showing a diminished intensity. The good news, such as it is, centers on new home sales. Earlier this year, the pace of decline suggested an acceleration in the downward trajectory. Fitch Ratings at the time projected a 15 percent drop in home sales for this year over 2024. More recent news suggests, however, that things will not deteriorate quite so fast. Fitch Ratings now projects only a 7 percent decline for this year.
Some
media outlets have described the news as evidence that the decline in property markets may be “bottoming” after more than four years. Without dismissing the news, it would nonetheless be a mistake to draw such a dramatically upbeat conclusion. Declines, after all, continue—serious declines, too—just at a slightly diminished pace. And other evidence is even less encouraging.
Perhaps the most hopeful aspect of this recent news is the indicator that Beijing’s earlier efforts to blunt the effects of the crisis might actually have gained some traction. Regulators, in an effort to ease the property market strains, had, for instance, ordered state-owned financial institutions to
extend credit more liberally to residential property developers. Statistical evidence on this matter remains spotty, but an alternative sign that the money has flowed comes with the news that the major developer,
Country Garden, was able in July to restructure the equivalent of some $178 million in offshore debt.
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It also seems as though there is some success from Beijing’s
plan of some months ago to finance local government purchases of unsold apartments for conversion to low-cost housing. According to a recent 13-city
survey, the inventory of unused apartments dropped an average of 15 percent from last year. In Shenzhen, the technology hub bordering Hong Kong, this inventory has declined by 50 percent, while in Hangzhou, it dropped by 23 percent, and in Suzhou, it has fallen by 20 percent.
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But there is also quite a flow of less-than-upbeat news. Even as Fitch Ratings improved its forecast of new home sales, the most recent
figures indicate that the improvement may not last. Home sales fell more steeply in June and July than earlier in the spring, more than 20 percent from comparable times in 2024, in fact.
Perhaps even more concerning,
home prices in a recent 70-city survey showed an accelerated rate of decline, falling by 0.3 percent in just the month of June, the most recent period for which data are available. That amounts to a 3.7 percent annual rate and the worst performance in eight months.
It is said that in olden times, sailors lost at sea would take heart if they saw straws in the wind, taking their presence as a sign that land was near. The improvement noted by Fitch Ratings and taken to heart by some media outlets may be characterized in just this way. The evidence is hardly conclusive and should be treated as tentative at best. Even if the signals turn out to be a reliable indicator of improvement, the continuation of decline and other even less uplifting evidence should remind all observers that China has a long way to go before it remedies its problems in the property sector and the economy generally.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
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Udumbara
