On Tuesday, July 2, Chinese real estate company stocks listed in Hong Kong soared after private data showed that annual sales of major Chinese real estate developers continued to slow down in June. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.
Developer stocks rose sharply.
The Hang Seng mainland property index rose 3.5% at noon, and earlier rose 4.8%.
The share prices of private developers Longfor Group, Shimao Group and Agile Group all rose more than 5%, while the share prices of state-owned developer China Resources Land and private enterprise CIFI Holdings Group rose more than 4%.
The market is closely watching the impact of the large-scale government support measures launched in mid-May on stabilizing the weak real estate industry in the country.
In May, the Chinese government announced a comprehensive historic support measures to help the real estate industry, which has been severely hit by the liquidity crisis since 2021, when many corporate debts have been defaulted.
How did the industry perform in June?
According to CRIC, a real estate research institution, sales of China’s top 100 real estate developers in June increased by 36.3% compared to May, but decreased by 16.7% compared to the same period last year, narrowing the decline from last month's 33.7%.
CRIC said that nearly one-third of developers, mainly state-owned and state-owned background companies including China Overseas, Poly Developments and Holdings Group, Greentown China and China Resources Land, achieved year-on-year sales growth in June, highlighting industry differentiation.
Research companies predict that after a series of support measures, more home buying behavior is expected to emerge, and with the lower year-over-year base from last year, the annual decline in July will continue to narrow.
Another real estate industry research company, China Index Academy, said on Monday that in June, the average price of new homes in 100 cities nationwide rose by 0.15% from the previous month, the slowest increase in five months.
Is it still difficult to destock new homes?
Despite the recovery in second-hand housing transactions in China's first-tier cities, developers are still struggling with the digestion of new home inventory.
In Shenzhen, although the government relaxes measures to stimulate the market, new home sales fell 4% year on year in June. According to Meilian Property, developers' inventories are still high, causing a divergence in results between new and second-hand home sales. Zhang Dawei, an analyst at China's Zhongyuan Group, said new home sales in Beijing in June were weaker than those of second-hand homes.
As new homes are usually higher-priced or located in the suburbs, buyers in China’s first-tier cities remain cautious about new homes. This has resulted in unbalanced recovery that highlights the challenges facing developers with limited funding who rely on sales recovery to relieve liquidity pressures.
"Buyers prefer cheap second-hand housing that is close to city center, with surrounding shops, schools and hospitals," said Jingjian Consulting founder Zhang Hongwei, who provides consulting services to real estate companies. He added that new home sales may further weaken in late July.
Is the Chinese economy difficult to achieve its target?
Slow new home sales have hindered China's economic recovery. Bloomberg Economics estimates that China's economic growth this year may be lower than the government’s target of 5%. China’s real estate information company said that although the sales decline of China’s top 100 developers narrowed last month, transaction volume in June remained at a low level.
Kristy Hung, an analyst with Bloomberg Intelligence, wrote in a report on Tuesday: "Dim house prices and job prospects continue to be obstacles to sustainable, broad-based recovery."
Economists predict that the central government will introduce new measures to support the market after policymakers urge officials to launch more "creative and bold" support measures. In addition, China has released 300 billion yuan ($41 billion) in central bank funds to help government-supported enterprises purchase excess inventory from real estate companies.
However, the recovery of the second-hand housing market has provided some relief for homeowners looking to cash out.
According to Meilian Property, the number of existing residences sold in Shenzhen in June soared to the highest monthly level in over three years, exceeding expectations. Similarly, according to official and Zhongyuan data, the sales volume of second-hand housing in Shanghai reached the highest level in nearly three years, and Beijing reached the highest level in 15 months. According to Zhang Hongwei of Jingjian Consulting, in Shanghai, about 70% of second-hand housing is old residences in the urban area with a price below 4.5 million yuan.