Market Trends

China Housing Market Struggles: New Measures Fail to Impress Wall Street Analysts

Despite new stimulus measures to support the China housing market, Wall Street analysts remain unconvinced, citing deep-rooted challenges that could limit the impact of these policies.

China has announced new measures aimed at rescuing its struggling housing market, but these efforts have yet to boost confidence among top Wall Street analysts. Despite Beijing's attempts to address the sector’s problems, experts say these policies may not be enough to solve the deep-rooted challenges plaguing the China housing market.

China's New Measures to Stabilize the China Housing Market

On Thursday, Chinese officials revealed new policies designed to stabilize the flailing China housing market. These measures include faster credit access for developers and support for renovating urban areas, specifically focusing on rundown "urban villages" with a goal of renovating one million apartments. Read more about China’s housing stimulus here.

Additionally, the government extended its "white list" of unfinished housing projects eligible for government financing, increasing available funds to 4 trillion yuan ($550 billion) by the end of the year. This is nearly double the current amount allocated to such projects. The Ministry of Housing hopes this will spur banks to extend more loans to struggling developments. Further details on the housing project support.

Wall Street Skepticism on China Housing Market Recovery

While these steps appear ambitious, Wall Street remains unconvinced. Experts from Goldman Sachs, BCA Research, and AXA Investment Managers expressed doubts about the effectiveness of these efforts in truly reviving the China housing market.

Goldman Sachs analysts noted that while the new measures may slightly improve financing, home completions, and real estate transactions in major cities, they fail to address the underlying structural issues within China’s property market. Learn more from Goldman Sachs' analysis.

"Given the many structural challenges in the property sector and still-limited policy support for housing destocking, we maintain our view that there appears to be no quick fix for the nationwide China housing market," said Goldman Sachs in a note on Friday.

BCA Research echoed these concerns, highlighting the plan's lack of detail. Analysts pointed to the history of unsuccessful "white list" project loans, which have failed to gain momentum due to banks’ reluctance to finance risky projects. BCA’s full report on China’s housing strategy.

Moreover, they found the apartment renovation plan to be underwhelming, noting similarities with a previous program from 2015, which aimed to renovate 6 million units annually but lacked clear timelines. The new plan, similarly, does not provide specific details or deadlines.

Global Recession Fears Amid China's Housing Market Crisis

BCA analysts went on to warn that China’s economic struggles could have global repercussions, potentially triggering a worldwide recession. More on global recession concerns.

"While a step in the right direction, these stimulus measures are falling short of the scale needed to reflate the China housing market and overall economy," BCA said. "The stimulus announced should put a floor on activity sometime in 2025, but it will likely be too little, too late to prevent a global recession."

Market Response and Economic Growth Linked to China Housing Market

Despite the lukewarm reception from analysts, China’s new policies briefly energized the market. The CSI 300 index surged by 3.6% on Friday, fueled by optimism around the announcement. More about the market surge on the CSI 300 index.

Yingrui Wang, China economist at AXA Investment Managers, cautioned that this market rally may be short-lived. Wang explained that while recent monetary easing and fiscal policies initially boosted sentiment, the lack of detail in the housing stimulus could temper this optimism in the long term.

"Delays and a lack of clarity in fiscal policy may soon dampen the initial enthusiasm," Wang said in a note on Friday.

The market rally was also bolstered by China's recent economic data, which showed a 4.6% expansion in the third quarter compared to the same period last year. While this marked a slight slowdown from the 4.7% growth in the second quarter, it exceeded forecasts of 4.5% growth. Year-to-date, China’s economy has grown by 4.8%, bringing it closer to its annual growth target of "around 5%." Check China’s economic growth data.

Wang noted that the latest figures make this target more achievable. However, without significant additional policy support, it remains uncertain whether China will hit its full-year goal.

Conclusion: Can the China Housing Market Be Saved?

Despite China’s latest efforts, Wall Street analysts remain skeptical about the country’s ability to revive its housing market. While Beijing’s measures may provide temporary relief, the underlying structural challenges in the China housing market are likely to persist, limiting the effectiveness of these policies. As China continues to navigate its economic slowdown, the global economy could also feel the ripple effects. Explore expert predictions on China’s housing crisis.