Shares of Chinese developers saw a significant increase on Tuesday following promises of enhanced policy support and adjustments to property policy by China’s top leadership. This move suggests that easing measures will be implemented to aid the struggling property sector.
Notably, property developers’ shares surged in both the Hong Kong and mainland markets. The Hang Seng Mainland Properties Index rose by an impressive 10%, outperforming the benchmark Hang Seng Index, which experienced a modest increase of 2.8%.
In Hong Kong, Country Garden Holdings witnessed an 11% climb, while Longfor Group Holdings advanced by 19%. Meanwhile, in mainland trading, China Vanke added 5.7% to its share price, and Poly Developments & Holdings Group experienced a substantial jump of 7.6%.
The country’s top decision-making body, the Politburo, convened a meeting on Monday to address the challenges faced by the Chinese economy, including weak domestic demand, the struggles of certain enterprises, risks in various key areas, and a complex external environment.
This meeting was held in the wake of data revealing that China’s economic growth slowed to 0.8% in the second quarter compared to the previous quarter.
One of the key challenges currently confronting the world’s second-largest economy is the decline in home sales and home prices, which have continued after a brief uptick at the start of 2023. Nonetheless, with the government’s commitment to providing additional support and implementing necessary adjustments, the Chinese property sector can expect a welcome boost.
Government to Adjust Property Policies as Demand Shifts
Officials in Beijing have announced plans to promptly adjust property policies in response to changing supply and demand dynamics. This move suggests that measures will be taken to support the struggling property sector, which is estimated to contribute to one-third of China’s economy.
According to data from E-house China Research and Development Institution, the number of listings for existing homes in 13 major cities, including Shanghai, Beijing, and Hangzhou, increased by 25% between December and May. Notably, listings surged by 82% in Shanghai and 72% in Wuhan.
Citi analysts have stated that the government’s supportive stance on property demand and supply dynamics exceeds their conservative expectations. This acknowledgment at the top level signifies a willingness to make significant changes to address the challenges faced by the industry.
However, some analysts caution that more time and effort will be required to stabilize the sector. Nomura economist Lu Ting does not anticipate the introduction of a large-scale stimulus program like those implemented in previous cycles to boost the housing sector.
In summary, Beijing’s commitment to adjusting property policies demonstrates a proactive approach to mitigate the challenges in the sector. While it may take time to fully stabilize the market, this step indicates a recognition of the importance of the property sector in the overall economy.