Two global credit rating agencies are predicting that the sluggish Chinese real estate market will face even more downside risks, with consecutive downgrades in their outlook for the Chinese property market. Despite multiple market rescue measures implemented by the Chinese authorities, external observers still believe that a revival in the Chinese real estate sector is difficult to achieve.
According to Bloomberg, S&P Global Ratings lowered its expectations for new home sales in China in 2024 on Thursday, projecting a 15% decline in residential sales this year, significantly higher than their previous forecast of a 5% downturn.
S&P Global Ratings stated that this year’s new home sales may fall below 10 trillion yuan (around 1.4 trillion USD), approximately half of the peak in 2021.
Fitch Ratings adjusted its forecast for 2024 new home sales to a decline of 15%-20% on Wednesday, with sales totaling 8.3 trillion yuan (about 1.1 trillion USD), lower than their earlier prediction of a 5%-10% decrease.
The pessimistic outlook from the rating agencies indicates their lack of confidence in recent stimulus measures to end the drag of the property market slump on the Chinese economy.
Last month, policymakers unveiled a comprehensive real estate rescue plan, including relaxing mortgage rules, providing 300 billion yuan in central bank-backed housing refinancing, and encouraging local governments to purchase unsold homes.
Subsequently, the three first-tier Chinese cities of Shanghai, Shenzhen, and Guangzhou introduced significant loosening policies for homebuyers, significantly reducing down payment requirements and allowing for cheaper mortgage loans.
However, investors and analysts remain skeptical about the effectiveness of these measures, with slow progress seen in several pilot cities and housing oversupply continuing to depress property prices, leading people to lose motivation to invest in real estate.
Data released by the Chinese National Bureau of Statistics this week showed that in May, the prices of new homes in 70 cities fell by 0.71% compared to April, marking the largest decline in nearly a decade; while existing home prices decreased by 1% month-on-month, the most significant drop since the implementation of the current data collection methods by the Chinese government in 2011.