After sucking up domestic confidence and global commodities markets over the last few years, China’s property blackhole could finally be closing.

The austerity slogan, proliferating these last years – “Housing is for Living, not for Speculating” – has gone AWOL from the latest high-level conference. That’s the first time in ages – and that alone’s fanned speculation anxious official restrictive controls imposed across China’s mega tier-1 and also pretty mega tier-2 cities could get axed.

More importantly the pretty useless Housing Ministry has moved on a veiled threat from the Politburo by calling a Zoom with some of the country’s biggest developers, reportedly passing on the word that the government is toying with lowering down-payment ratios and funding rates, to help turn the cash taps back on.

And markets have noticed.

Mainland developers  previously flailing about in Hong Kong smashed it on the Hang Seng last week.

LongFor Group surged more than 26% and Country Garden Holdings found a snappy 22%.

In Hongkers,  the Hang Seng Mainland Properties Index wandered ahead by a lazy 14%, the best five sessions since similar offiical platitudes arose and then died down around Christmas last year.

The Hang Seng China Enterprises Index jumped as much as 3.2% on Monday before finishing 1.3% higher. It surged 6.1% surge last week. The CSI 300 Index of mainland shares rose 0.6%.

Bloomberg noted a lack of policy execution repeatedly in the past; investors are hoping things will be different after the promises made at last week’s Politburo meeting.

Overseas funds bought onshore China stocks for a fifth straight session on Monday, taking net purchases since the key meeting to 49 billion yuan (US$6.7 billion).

 

A new bottom

It seems the run has been inspired some very outstanding mainland mortgages loans which fell over Q1 delivering the very first year-on-year decline for Chinese property since central bank records began 20 years ago.

China’s lending right now is patchy as kid among cabbages with household loans including mortgages up 367.2 billion yuan in May, (VS a contraction of 24.1 billion yuan in April).

Business loans rose to 855.8 billion yuan in May from 683.9 billion yuan in April, central bank data showed.

But the recent data has shown China’s recovery is stalling as global demand falters, raising expectations that the authorities need to spur growth and keep a lid on unemployment.

In the first quarter mortgage loans rose 0.3% on year, underscoring the urgency for the government to take more measures to prop the ailing property sector.

Personal mortgage loans shrank 0.7% in Q2 from a year earlier to 38.6 trillion yuan (US$5.5 trillion), according to data from the People’s Bank of China (PBoC) quarterly lending release late on Friday.

Stung, sizzled and anxious, China’s once ravenous homebuyers just keep steering clear of pumping the bank for a few bucks since Christmas 2021 as the property sector and its giant economic engines spluttered amid China’s loopy zero-Covid mandate.

First reputations, then heads rolled. Property sales stangnated, making loan demand a shadow of what’d been going on for 20 years or so.

Even now loans continue to shrink despite the hooplah surrounding China’s heroic emergence from zero-Covid.,

Seemingly immune to most economic hiccups, it’s been an uneasy first few steps for the post-COVID economy with the insanely high youth unemployment putting a mad grin  on what most thought would’ve been a smooth and smiling wlecome back.

The record slide in demand for loans has put fears of a second wave of collapsing sentiment across China’s critical property market.

While the industry has weathered repeated crackdowns by the government over the past two decades and its contribution to GDP has waned, the entire real estate sector remains at the heart of China’s near US$20 trillion economy.

Chinese property demand also drives China’s demand for Australian resources. Not least iron ore and coal.

Should it take another unexpected backward step, the impact on its already faltering growth outlook could spread. The property market and related sectors from home appliances to building materials make up about a quarter of the nation’s gross domestic product.

“High-frequency data shows that new-home sales remained sluggish in July,” Yang Zhenyu, an analyst at China Merchants Securities told the SCMP over the weekend.

“The recovery outlook now remains uncertain and the market is awaiting policies that will boost the sector.”

Chinese housing sales have stagnated despite a post-zero-COVID mini-bump, with the downtrend spreading even to the bigger cities.

Sales of new homes dropped at an annual rate of 5.3 per cent to almost 600 million square meters in the first half, according to the official data, while property investment fell 8% from a year earlier to 5.9 trillion yuan in the same span.

The SCMP says Beijing is “already on the move to reassess and recalibrate its tough stance on the industry”.

Certainly when the Politburo met last Monday they were far more gentle about the need to help the ailing sector, striking a dovish tone at its meeting and giving its best impression of nothing to see here that the country’s highest decision-making big guns can give.

That said a magic recovery from the black hole where the property market once was is not happening overnight.

Growth is still slowing and personal savings remain tightly under the bed, says Raymond Cheng, MD of property management of CGS-CIMB securities.

He told Chinese media to attend some official action on the current rigid buying restrictions in top tier cities.

“Home-buying sentiment was quite weak at the end of June, this explained why authorities need to do more. And homebuyers want to wait in anticipation of further price declines.”

Local media on Sunday reported the Guangzhou Housing Authority plans to release loosening policies to trigger housing demand and hopefully rekindle the southern city’s giant property market.

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