Analysis | China property: ‘underwhelming’ stimulus to fall short of refloating market amid sunken buyer confidence, analysts say

Scott Xiong of Wuhan, the capital city of China’s central Hubei province, is racked with disappointment after a potential buyer pulled the plug on a deal to buy his home last week. Now the 30-year-old PhD student is considering cutting another 50,000 yuan (US$6,900) from his asking price, which is already close to his original floor price.

Meanwhile, 840km away in Shanghai, Li Huiting is feeling buyer’s remorse after she bought a second-hand home with her husband in the city’s Pudong New Area in April. Prices then had already dropped by around 1 million yuan compared with a year earlier, but now the 26-year-old teacher thinks “prices might go lower if I waited for a while”.

Both stories suggest that a stimulus plan unveiled a week ago – including more than US$41 billion for local governments to buy unsold homes – may not be sufficient to refloat China’s massive property market, which ran aground more than three years ago. Certainly little has changed for potential buyers, who at this point have been conditioned to expect falling prices and to eye developers’ promises about delivery dates with a jaundiced eye.

“This is a buyer-led market, where I must offer more benefits to lure buyers,” Xiong lamented. In fact, he worries that the new policies reinforce the idea that the market is in a downturn, leading buyers to delay their decisions in case prices plummet further or even more supportive measures rain down.

The property market once accounted for about a quarter of China’s economy but has been high and dry since August 2020 when China’s “three red lines” policy shut the industry’s weakest borrowers out of the capital markets.

To bail it out, authorities on this month reduced down-payment ratios, cut mortgage interest rates and introduced the 300 billion yuan (US$41.4 billion) relending facility, which allows local state-owned enterprises to buy unsold homes they can then offer as affordable housing. They will also be able to buy back undeveloped land from developers.