Due to market speculation that the Chinese government and the central bank will announce new measures to boost the real estate market at the joint press conference scheduled for Thursday, October 17th, shares of Chinese real estate developers rose.
Before the joint press conference on Thursday, the Bloomberg developer stock index rose by 8.3%, reversing the nearly 7% decline on Tuesday. One of China's largest real estate companies, Vanke, saw its stock price rise by 16% in Hong Kong, while Longfor Group also rose by 13%. #Chinese real estate crisis#
According to a notice released on Tuesday evening, the State Council Information Office will hold a press conference at 10 am on Thursday, October 17, 2024, where Minister of Housing and Urban-Rural Development Ni Hong, officials from the Ministry of Finance, Ministry of Natural Resources, People's Bank of China, and the China Banking and Insurance Regulatory Commission will introduce the relevant situation to promote the stable and healthy development of the real estate market and answer questions from reporters.
The rise in real estate stocks on Wednesday indicates that investors remain optimistic about Beijing introducing more stimulus measures to boost the weak economy, despite the overall disappointing measures announced earlier this month at a news conference by the Ministry of Finance and the National Development and Reform Commission.
Bloomberg industry research analyst Kristy Hung said that the focus of the press conference may be to include more projects in the "white list" to ensure housing delivery, accelerate local government purchases of unsold houses for affordable housing, and revitalize the land market. The "white list" refers to residential projects considered suitable for financial support.
She added that investors may need to see more specific arrangements for quantifiable targets or funding to believe that the fundamentals of the Chinese real estate market will see substantial improvement.
In addition, some US dollar bonds issued by Vanke and Longfor Group rose by 0.5 to 1 cent on Wednesday. Vanke's 3.975% bonds due in 2027 rose by 0.9 cents to 67.4 cents.
Iron ore futures in the Singapore market remained relatively stable after fluctuations. The slowdown in the Chinese economy this year has dealt a heavy blow to the steel raw materials.
However, some analysts warn that the press conference may not bring any new information, and investors should pay more attention to the meeting of the National People's Congress Standing Committee at the end of October.
Ling Vey-Sern, Managing Director of Singapore's UOB Bank, said, 'So far, a series of subsequent press conferences from the National Development and Reform Commission to the Ministry of Finance have been disappointing, so it is entirely possible that no new information will be released tomorrow, leading to a drop in stock prices.'
It is worth noting that on Wednesday (October 16), Hong Kong announced that it will relax mortgage rules, allowing homebuyers to pay a lower down payment to address the continued downturn in the city's real estate market.
Hong Kong Chief Executive John Lee Ka-chiu stated in the policy address on October 16 that the loan-to-value ratio (LTV) for all residential properties will be set at 70%. This change will lower the down payment requirement for properties valued over 35 million Hong Kong dollars (4.5 million US dollars), where the LTV ratio was previously 60%. The loan-to-value ratio for properties held by companies will also increase from 60% to 70%.
In addition, Hong Kong's new capital investment immigration plan will expand to allow investments in properties of 50 million Hong Kong dollars or more as qualified investment projects, with a maximum real estate investment limit of 10 million Hong Kong dollars.
These measures are the latest attempts by the Hong Kong government to revitalize the real estate market. However, compared to last year, these changes appear insufficient as the government substantially reduced additional stamp duties for some homebuyers last year.
Despite recent interest rate cuts in Hong Kong, the real estate market has not rebounded. Faced with excess housing inventory and economic softness, developers continue to price their projects more conservatively to absorb as much demand as possible. Second-hand property prices are even lower than the levels before the September interest rate cut by banks.
According to analysts at Bank of America, due to high housing inventory, residential prices may continue to be under pressure in the short term. Bloomberg industry research data shows that the unsold property inventory has reached its highest level in 20 years.
