New | Policy support fuels hopes of China property market recovery
Mainland property market shrugs off Kaisa debt default, encouraged by strong series of measures expected to bring back homebuyers
Accelerating policy support has fuelled expectations of an immediate home price recovery in China, overturning fears of widespread defaults in the wake of developer Kaisa's debt woes.
The People's Bank of China cut banks' required reserve ratios by 100 basis points over the weekend to pump liquidity into the country's slowing economy. That came just 20 days after the central bank lowered down-payment requirements and the finance ministry cut transaction taxes to improve housing affordability and stimulate property demand.
"The recent policy support is stronger than expected and will likely overshadow Kaisa's impact on the property market," said Franco Leung, a senior property analyst at Moody's. Shenzhen-based Kaisa confirmed on Monday night it had become the first mainland Chinese firm to default on offshore debt interest payments after failing to pay close to US$52 million over the weekend.
Nicole Wong, the head of property research at brokerage CLSA in Hong Kong, agreed that strong policies "will encourage more homebuyers back into the market as asset prices are expected to increase".
She projected that home prices would surge more than 10 per cent this year in China's first-tier cities - Beijing, Shenzhen, Shanghai and Guangzhou - due to short supply as demand would revive while developers had been slowing construction since the industry entered a downturn early last year.
Wong said when investors took profits from a recent stock market rally, some of them would spend money to upgrade to bigger and better homes due to limited investment options onshore.
