China’s real estate policies have not been effective

Data released by the National Bureau of Statistics of China on June 17 showed that from the perspective of the prices of newly built commercial housing in 70 large and medium-sized cities in China in May, 68 cities fell from the previous month. Due to sluggish sales, the average decline hit a new high since October 2014. Although the government has proposed to purchase inventory housing and cancel the lower limit of housing loan interest rates, the effect is still not obvious.

The average decline in new commercial housing in 70 large and medium-sized cities was 0.7%. It has continued to fall since June 2023. From the perspective of second-hand housing, which has loose transaction price controls and is easy to reflect market supply and demand, all 70 cities have fallen.

This is because housing sales have not been able to get rid of the extreme downturn and real estate companies have excess inventory. From January to May, the sales area of ​​new residential buildings fell by 24% compared with the same period last year. As of the end of May, the inventory area of ​​new houses increased by 25% compared with a year ago.

Sales are still falling after entering June. The think tank “China Index Research Institute” surveyed 30 major cities on the transaction area of ​​new houses during the Dragon Boat Festival holiday from June 8 to 10, and the results showed that it was 16% less than the same period in 2023.

According to data from the People’s Bank of China, the floor of loan interest rates has been lifted except in major cities such as Beijing and Shanghai. Many commercial banks have lowered their loan interest rates.

So far, the real estate stimulus policy has not been very effective. The net increase in medium- and long-term funds such as housing loans lent to households by banks has decreased by 70% compared with the same month last year. The expectation that “house prices will fall” is still spreading, and stimulus measures such as lowering loan interest rates are becoming increasingly difficult to work.

At a press conference on June 17, a spokesman for the National Bureau of Statistics pointed out that “it will take some time for the policy effect to be released, and the real estate market is still in the process of adjustment.”

From the perspective of the Chinese economy, insufficient domestic demand such as the real estate recession is long-term. Private enterprises still have concerns about the future, and active investment such as new factories is insufficient.

The National Bureau of Statistics announced on the same day that fixed asset investment from January to May increased by 4.0% year-on-year. The driving factor was the investment of state-owned enterprises, which increased by 7.1%, while the growth rate of private investment narrowed to 0.1%.

In May, the added value of industrial enterprises above designated size increased by 5.6% year-on-year, but the growth rate slowed down from 6.7% in April. The production of new energy vehicles such as pure electric vehicles (EVs), which the United States, Japan and Europe believe have overcapacity problems, increased by more than 30%, but the overall growth of automobiles was only 1.3%. Retail sales in May showed that automobile-related sales fell by 4.4%.