China's property sector faced a sharp decline on Thursday as new measures unveiled by the country's housing ministry failed to reassure investors, leading to a nearly 8% drop in the CSI 300 real estate index. The broader CSI 300 benchmark also declined by 1.13% to close at 3,788.22. This setback comes as Beijing intensifies efforts to stabilize the property market, which has been under pressure since 2021, impacting the wider economy of the world's second-largest nation.
Despite the government's announcements of increased financial support, including a significant expansion of its "white list" of eligible housing projects, the measures were not enough to sustain the sector's recent gains. According to Ni Hong, China's Minister of Housing and Urban-Rural Development, the government aims to boost bank lending for these projects to 4 trillion yuan ($562 billion) by the end of the year. The expanded credit line is part of a broader strategy to ensure that developers complete existing projects and deliver homes to buyers, a key concern in the beleaguered sector.
Ni also outlined plans to accelerate urban redevelopment, including the revitalization of a million "urban villages." He emphasized that resettling people in these areas would help absorb the existing housing inventory. "It can be said that the bottoming out of the property market has begun," Ni stated during the press conference. However, the market's reaction was tepid, with the yuan holding steady against the U.S. dollar and property stocks declining significantly.
Hong Kong's Hang Seng Index, closely tied to Chinese economic performance, fell 1.3% to 20,030 in its final hour of trading. The Hang Seng Mainland Properties Index dropped 6.6%, reflecting the broader investor skepticism surrounding China's real estate outlook. Market analysts noted that while the Chinese government has been rolling out incremental measures to boost confidence, they have not yet succeeded in reversing the negative sentiment.
"From today's press conference, we think few incremental policies on boosting home demand were announced," said Jeff Zhang, an equity analyst at Morningstar Research. "The most significant directive pertains to credit support to projects on the white list. We expect an acceleration in execution, with more distressed developers receiving funds for home completions, which would help shore up homebuyers' confidence."
This lack of new and impactful measures contributed to the steep decline in property stocks. The CSI300 real estate index's nearly 8% fall reversed the gains it saw earlier in the week, leaving investors disappointed with the government's strategy. Xiao Yuanqi, deputy director of the State Financial Regulatory Administration, reported that approved loans for projects on the white list had risen to 2.23 trillion yuan as of October 16. However, this news was not sufficient to boost market sentiment.
Elsewhere in Asia, markets reacted with caution. Japan's Nikkei 225 slipped 0.69% to close at 38,911.19, while the broader Topix index edged down by 0.11% to finish at 2,687.83. The declines followed weaker-than-expected trade data from Japan, showing a 1.7% drop in exports for September compared to the same period last year. The data surprised economists, who had anticipated modest growth.
South Korea's Kospi index also ended the day lower, closing at 2,609.30, with the Kosdaq dropping slightly by 0.1% to 765.79. In Taiwan, the Taiex saw a minor gain of 0.19% to end at 23,053.84, as markets awaited earnings results from Taiwan Semiconductor Manufacturing Company (TSMC).
Despite the broader decline in Asia-Pacific markets, Australia's S&P/ASX 200 bucked the trend, rising 0.86% to 8,355.9. The positive movement was attributed to labor market data showing that the country's unemployment rate had fallen to 4.1% in September, slightly better than expected.
In an effort to stabilize its property sector, China's finance ministry has announced additional measures, allowing local governments to use funds from special bonds to purchase unsold homes and idle land. The central bank also recently reduced the minimum down payment ratio to 15% for all buyers and adjusted interest rates on existing mortgages, expected to benefit millions of households. Deputy Governor Tao Ling reported that these rate cuts helped households save 150 billion yuan.
Despite these efforts, the market remains cautious. Analysts pointed out that while such steps are aimed at providing relief to developers and encouraging home purchases, the broader sentiment remains fragile. According to a report by Nomura, as of January, there were an estimated 20 million pre-sold but unfinished homes in China, highlighting the scale of the problem.
In recent months, China's politburo, led by President Xi Jinping, has called for further measures to stabilize the market, including addressing the financial health of distressed developers and ensuring timely home deliveries. However, Thursday's briefing failed to provide the kind of bold new initiatives that investors were hoping for.
