China’s housing market downturn is expected to continue as recent government interventions have failed to adequately stabilize the sector, according to a JPMorgan economist. Haibin Zhu, JPMorgan’s chief China economist, stated on CNBC’s “Squawk Box Asia” that the housing market crash “is still not over yet,” and projected that home prices may not see a significant recovery until at least 2025.
Data from the China Index Academy showed that the average price for new home sales across 100 cities in China increased by a mere 0.11% from July to August, a slight deceleration from June’s 0.13% growth. Meanwhile, resale home prices dropped by 0.71% month-over-month. Over the past year, prices for new homes have fallen by 1.76%, while resale home prices have plunged by 6.89%, highlighting the ongoing crisis in the country’s housing market.
In response to the market turmoil, Bloomberg reported that China is considering a plan to lower borrowing costs for homeowners by allowing refinancing on up to $5.4 trillion in mortgages. However, analysts, including JPMorgan’s Zhu, remain skeptical about the effectiveness of such measures. Zhu emphasized that the refinancing policy would mainly benefit existing homeowners and would not necessarily stimulate new home demand.
Winnie Wu, chief China equity strategist at BofA Securities, echoed this sentiment, arguing that reducing mortgage rates could lead banks to lower deposit rates to protect their margins, thereby affecting household savings and consumption negatively. Wu suggested that a mere rate cut would not be sufficient and urged the government to implement strategies that would generate a positive feedback loop in the economy rather than contribute to a “downward spiral.”
Both economists agree that while the government’s proposed measures may offer some relief, they fall short of addressing the deeper issues plaguing China’s housing market. Without more effective intervention, the market is likely to remain under pressure for the foreseeable future.
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