China's Housing Market Faces Ongoing Crisis Despite Government Stimulus, Says JPMorgan Economist

Despite a series of governmental measures, China's housing market remains in a state of turmoil, as emphasized by Haibin Zhu, chief China economist at JPMorgan. With a slow and modest increase in home prices, experts believe the situation may not stabilize until 2025.

Limited Impact of Government Measures

Recent efforts by the Chinese government to bolster the housing market have proven to be inadequate, as acknowledged by Zhu. Despite the implementation of various stimulus and support measures, the anticipated positive impact on the sector has not materialized. The disappointing results have led analysts to express doubts about the effectiveness of these interventions in revitalizing the troubled housing market.

Modest Increase in Home Prices

The data released by China Index Academy reveals a modest 0.11% increase in the average prices for new home sales across 100 Chinese cities from July, marking a further slowdown from June's 0.13% growth. This sluggish growth highlights the persistent challenges facing the housing market, indicating that a substantial turnaround is still a distant prospect.

Ongoing Decline in Resale Home Prices

Moreover, resale home prices experienced a decline of 0.71% from the previous month, underscoring the continued weakness in the housing market. Compared to a year ago, both new and resale houses witnessed a reduction of 1.76% and 6.89% in average prices, respectively, emphasizing the deep-seated crisis plaguing the country's housing market.

Potential Measures and Skepticism

Bloomberg reported the consideration of a plan to lower homeowner borrowing costs through the refinancing of up to $5.4 trillion in mortgages. However, analysts expressed skepticism regarding the potential effectiveness of this measure in boosting homebuyer sentiment and overall consumption. They pointed out that while lower mortgage rates may incentivize consumption, it could also lead to decreased interest income on household savings due to lower deposit rates.

Furthermore, there are reservations about the impact of the mortgage refinancing measure on stimulating new home demand. Zhu from JPMorgan emphasized that regardless of the policy's implementation, it primarily benefits existing homeowners and does not significantly contribute to reviving the demand for new homes.

The Need for Effective Strategies

Wu from BofA Securities argued that rate cuts are not the most effective approach, suggesting that the government should focus on creating a positive feedback loop rather than exacerbating the downward spiral. This highlights the need for the Chinese government to adopt more comprehensive strategies to address the ongoing challenges in the housing market.

Looking ahead, it is evident that the housing market in China is likely to face continued softness in the near future. The limited impact of government measures, coupled with the modest increase in home prices and ongoing decline in resale home prices, signifies the pressing need for more effective and targeted strategies to revitalize the struggling housing market.