China’s property sector: This time is different

  • 09 March 2022 (7 min read)

Key Points

  • China’s property market is now enduring its longest and most painful adjustment despite brief relief after the initial wave of the pandemic.
  • Yet, not only has Beijing so far refused to come to the market’s rescue, much of the downturn has in fact been a result of its restrictive policies.
  • We think these policies – to address structural imbalances of the real estate sector – are fundamentally different from past attempts to cool a cyclically overheating market. With slowing population growth and changing national development strategies, Beijing is redefining the role of real estate under the banner of a ‘house is for living, not speculation’
  • The challenge of achieving this objective lies in fundamentally reallocating resources away from a gigantic sector which is deep-rooted in China’s social, economic, and financial ecosystem. A disorderly correction could have catastrophic consequences.
  • Hence, a pragmatic approach is needed to manage systemic risks. As Beijing’s priority now shifts to stabilising growth, policies are fine-tuned to put a floor under the market. A gradual bottoming out of activity is expected as credit conditions improve, but not enough to fully remove stress on the weakest developers. The latter will likely continue to bear the brunt of the adjustment pains.
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    Disclaimer

    This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. It has been prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.

    Due to its simplification, this publication is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this publication is provided based on our state of knowledge at the time of creation of this publication. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    All investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested.

    Some of the Services and/or products may not be available for offer to retail investors.

    This publication has not been reviewed by the Monetary Authority of Singapore.