China’s property market still needs more support: Goldman Sachs

China’s policy easing since September has been “more effective” than past interventions to stabilise the struggling property market, but “structural divergences” mean additional support measures are needed for a sustained recovery, according to Goldman Sachs.

“Compared to earlier episodes, the ongoing policy easing appears more effective in boosting home sales and stabilising prices, despite limited impact on property investment and other construction-related property activity,” the US investment bank said in a report on Tuesday.

Price corrections over the three-plus years of the property downturn – during which second-hand home prices have declined by around 25 per cent from their peaks – were a key factor behind the “strengthened effectiveness” of recent policy measures, Goldman analysts said.

The policy blitz since September “enhanced the transmission efficiency” of housing easing measures at the margin, while also unlocking pent-up demand from buyers who had previously adopted a wait-and-see attitude, they added.

The sector’s crisis began in late 2020 when authorities launched a campaign to deleverage developers and deflate a housing bubble. Total new residential sales have declined by around 50 per cent from their peak in 2021. In response, Beijing in September rolled out its most aggressive stimulus package since the Covid-19 pandemic, including lower down payment ratios, reductions in mortgage rates and a plan to let local governments use special bonds to absorb land and housing inventory.

Goldman cited a 75 per cent drop in new project starts amid private developers’ funding challenges, as well as second-hand home sales outperforming new home sales, as factors that reflect structural issues. Sales of lived-in homes currently account for 44 per cent of the national total after recovering from 19 per cent in 2021. Meanwhile, buyers remain wary of new homes out of fear that developers may not be able to deliver pre-sold projects.

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