Chinese real estate market will continue to cool in first half of 2022 with tight restrictions: Reuters poll

Apartments under construction are photographed from a building at sunset in the Shekou area of ​​Shenzhen, Guangdong province, China on November 7, 2021. REUTERS / David Kirton

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  • Home prices are expected to fall 1.0% in the first half of 2022
  • Real estate investment in the first half of 2022 is down 3.0%
  • Policymakers will largely stick to severe real estate restrictions, but will make some adjustments
  • Property tax pilot project to be implemented in 2022

BEIJING, Dec. 2 (Reuters) – China’s real estate slowdown is expected to continue in the first half of 2022, with house prices and sales falling as strict credit policies and an impending property tax dampen demand, according to a Reuters poll.

The real estate sector, a key growth engine for the world’s second-largest economy, has slowed sharply in recent months, with sentiment reeling from tight regulations and a growing liquidity crunch that has engulfed some of the biggest and most indebted developers. from the country.

Forecasts for house prices and real estate investment were darker than the last survey in August.

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Average home prices are expected to fall 1.0% in the first half of 2022, according to 14 analysts and economists polled by Reuters from Nov. 26 to Dec. 1.

For 2021, home prices are now expected to rise 2.6%, down from a forecast of 3.5% in the last survey and after gaining around 4.9% in 2020.

“The downward trend in house prices has emerged” due to tight quotas on home loans, concerns about a property tax and weak demand, said Chen Shen, analyst at Huatai Securities.

On the demand side, real estate sales by floor space are expected to fall 16% in the first half of 2022, compared to an increase of 27.7% during the same period this year.

Expectations on the supply side are also grim, with real estate investment falling 3.0% in the first six months of 2022, compared to a 15% increase in the first half of this year.

The rapid deterioration of conditions in the real estate sector has sparked speculation that policymakers could start to ease tight restrictions on buyers and developers and even cut interest rates if economic growth weakens too sharply.

But most Chinese observers expect authorities to stick largely to the restrictions for now, even as they fine-tune regulations, including a marginal easing of credit policies.

“Cities will ease restrictions on buying, selling, lending and restrictions on lowering selling prices based on local conditions,” said Zhao Ke, economist at China Merchants Securities.

Policy makers have recently made some adjustments to help genuine home buyers and some local authorities have taken steps to ease the financial crisis for developers. Read more

Chengdu, in southwest China, issued a notice last week to ensure developers receive funds from pre-sold properties and new loans. Read more

Of the 14 people polled, four expect pilot testing of a property tax to be extended to some wealthy cities, such as Shanghai and Shenzhen, by the end of this year at the earliest, and eight believe they will be. introduced in 2022.

As to how a property tax would affect house prices? Most people think it depends on the tax rate, although that should dampen the house price spike in the short term.

“New homes may experience a gradual decline in prices and volume sales” following the announcement of the list of cities implementing property tax testing, said Huang Yu, vice president of the China Index Academy, a Beijing-based real estate research institute.

“This could increase supply and reduce speculative buying, increasing downward pressure on home prices,” said Chen of Huatai Securities.

Most agree that homeownership will be more affordable over the next two to three years under President Xi Jinping’s campaign for “common prosperity” and the government’s slogan “houses (are) there for you.” live, not for speculation ”.

(For more articles from Reuters quarterly housing market surveys:)

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Reporting by Liangping Gao and Tony Munroe, additional reporting by Shuyan Wang; Editing by Kim Coghill

Our standards: Thomson Reuters Trust Principles.

Penny D. Jackson