SHENZHEN, CHINA – MARCH 09: View of tall commercial and residential buildings on March 9, 2016 in Shenzhen, China. The general economic slowdown continues in China, while the property and stock price bubble faces risk. (Photo by Zhong Zhi/Getty Images)
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Shares in most Chinese property stocks listed in Hong Kong jumped to their highest levels in more than a year as China’s stimulus rally continues.
The real estate sector was the biggest gainer in Hang Seng Indexwith Longfor Group Holdings leading the way, adding over 25%.
The shares of other real estate developers also showed significant gains. Default developer Shimao Group soared more than 97% while Kaisa Group soared 45.48%, both hitting their highest prices in more than a year.
Similarly, China Overseas Land & Investment rose 14.33% to its highest level since last September. China Vanke rose 45.5%.
Hang Lung Properties and China Resources Land gained 12.65% and 7.68% respectively.
The broader Hang Seng Index rose 5.46%, while the Hang Seng Mainland Properties Index rose over 11.69%. Markets in mainland China are closed for the Golden Week holiday.
The continued pullback from the real estate sector will leave behind a significant demand gap, keeping growth below target.
Over the weekend, major cities in mainland China introduced easing measures to boost homebuyer confidence, following a series of policy stimulus initiatives by the central bank last Tuesday.
Guangzhou City Government announced that all restrictions on housing purchases would be lifted from Monday. Shanghai’s reduction in the required tax period also took effect on Tuesday. Shenzhen has also eased purchase restrictions, allowing buyers to purchase one more apartment in select areas.
“Investors are betting that the recent easing of policy will lead to a recovery in the domestic market, which will help developers with sales and prices,” Gary Ng, senior economist at Natixis, told CNBC. However, he sees challenges with those expectations coming to fruition, especially with inventory pressure in cities outside of the first tier.
“If home sales don’t improve in the coming weeks, they could be back to square one,” he said.
While these measures will help stabilize the property market, rising prices and reviving demand will be a big deal, Morgan Stanley wrote in a note published on Wednesday.
“The continued pullback from the property sector will leave behind a significant demand gap, keeping growth below target,” the Asia-Pacific investment bank’s economists wrote.
Real estate accounted for more than 25% of China’s GDP, but has faced a prolonged decline since 2020 after Beijing cracked down on the sector’s excessive debt.
Chinese officials stepped up support to ease financial pressures on households and stabilize the struggling property market. However, these previous initiatives have not resulted in significant reversals.
“There are more signs of stabilization, but it does not change the fact that China’s real estate industry has entered the twilight of the era of rapid growth,” Ng said.
