China’s housing market is facing continued challenges as government support and stimulus measures fail to meet expectations. JPMorgan economist, Haibin Zhu, expressed concerns that the current housing market crash is far from over, predicting that home prices will not stabilize until at least 2025.
Recent data shows that the average price for new home sales in 100 Chinese cities increased by a mere 0.11% in July, marking a slow down from the previous month. Additionally, resale home prices experienced a decline of 0.71% from the previous month. Both new and resale houses recorded significant price drops compared to the previous year, indicating a deepening crisis in China’s housing market.
China is reportedly considering a plan to reduce homeowner borrowing costs by allowing refinancing of up to $5.4 trillion in mortgages. However, analysts, such as Winnie Wu from BofA Securities, are doubtful about the effectiveness of this proposed measure. Lower mortgage rates could potentially lead to banks lowering deposit rates, impacting interest income on household savings and overall financial stability. JPMorgan’s Zhu also believes that the mortgage refinancing plan is unlikely to stimulate new home demand.
While some may view lower mortgage rates as a way to boost consumption, the reality is more complex. Reduced deposit rates by banks could have wider repercussions on the financial system and household savings. The overall impact on homebuyer sentiment and consumption remains uncertain amidst the ongoing struggles of China’s housing market.
The future of China’s housing market remains uncertain, with challenges persisting despite government intervention and support measures. As the sector continues to grapple with softness and price volatility, stakeholders and analysts must closely monitor developments and assess potential solutions to address the ongoing crisis.