China’s recent real estate problems were very much reminiscent of the 2008 housing crisis in the US, and the issues in China could spill into other major sectors if they persist; as Finbold reported earlier, it has already affected youth employment.
While China’s growth stalls, the homebuyers refusing to pay their mortgages has brought developer issues into the news once again. Yifan Hu of UBS (SWX: UBSG) Global Wealth Management, joined CNCBs Opening Call to discuss China’s housing and recovery path, which she sees as volatile and bumpy.
“For the overall market, I think that currently, we come out with some of the policy to mainly try to stabilize markets rather than bail out developers. So and also the housing market in our view for the second half will continue to decline.”
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She added:
“So with the high-frequency data for the first two weeks in August, we say like has still down by 20%. However, that’s a narrowing from the minus thirty percent. So on one side, we think the housing market is still a drag, but that gradually it will perform better than the first half.”
Market stabilization
Hu stressed that China would be looking to stabilize the markets through effective policy and rate cuts, all aimed at simply stabilizing the markets and preventing a spillover effect into other areas of the economy.
“For the housing market, the target is to stabilize our market. So recently we saw that for some of the LPL cuts and also for the banking loan supports with the effective local policy and also central governments <…>, so that’s all trying to stabilize the market.”
Additionally, Hu claims that there will still be some pressure on property and equity markets but the general impact on the overall economy will be less than what was experienced in the first half of the year.
Even if effective policy and stimulus switch property sales into growth mode next year, the deterioration seen in homebuyers’ confidence could stall the recovery, as they are currently refusing to pay mortgages to protest construction delays for apartments they already paid for.
Finally, if this growing pain in the housing sector drags on, there is a real possibility of it negatively affecting other industries through next year.
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