BEIJING - China's embattled property sector made new progress in its climb out of a months-long slump as official data on Wednesday (March 15) showed much narrower declines in home sales, developer investment and construction starts in January to February.
Home sales by floor area fell 3.6 per cent in the first two months of 2023 from a year earlier, according to data from the National Bureau of Statistics (NBS), versus a 24 per cent decline for the whole of 2022.
The narrower sales decline followed a rise in new home prices in January, the first uptick in a year, as buyers, while still cautious, found solace in a slew of supportive policies, expectations of more stimulus steps and China's exit from its crushing zero-Covid regime.
Property investment by developers fell 5.7 per cent in January to February, improving from a 12 per cent slump in December and a 10 per cent decline for the entire 2022.
Analysts expect property sales to be the first indicator to turn positive soon and see property investment rebounding in the second half of 2023.
"The figures are a good start to the recovery of the property market for 2023, and will further boost confidence," said Yan Yuejin, analyst at the E-house China Research and Development Institution in Shanghai.
"Property sales figures are expected to turn from negative to positive in the first quarter of the year, the biggest sign that the property market is recovering."
Sentiment for China's property sector, for years a pillar of growth in the world's second-biggest economy, has been crushed by multiple crises since mid-2021, including developers' debt defaults and stalled construction of pre-sold housing projects.
The lifting of Covid-19 restrictions and release of funds to developers for ensuring delivery of pre-sold projects will boost demand, said analyst Ma Hong at Zhixin Investment Research Institute.
"Investment by developers, a key indicator of market performance, will likely rise in the second half of the year, meaning not only an overall rebound, but also a substantial improvement in the operating conditions of real estate companies," Ma said.
New construction starts measured by floor area fell 9.4 per cent in January to February from a year earlier versus a 44 per cent plunge in December and a 39 per cent tumble for the whole of 2022.
Developers' access to funds has also improved.
Funds raised by developers slumped 15 per cent in the first two months of 2023, compared with a 26 per cent fall in the same period last year.
"Real estate companies face a peak period of debt repayment in the first half of the year, and will only have the will and ability to expand their investments once sales and financing have grown," said Zhixin's Ma.
Around half of the 30-odd Chinese developers listed in Hong Kong have defaulted on or delayed bond payments.
At the beginning of the annual meeting of China's parliament this month, the government made guarding against risks to top property developers one of its top priorities this year, but added that it would prevent disorderly expansion by developers.