BEIJING - A plunge in China's new housing construction is fuelling hopes the battered property sector is finally coming to terms with chronic oversupply, but a clean-up of bad assets is the missing policy piece that keeps Japan-like stagnation fears alive.
Taking into account demographics and other factors, the International Monetary Fund estimates fundamental demand for housing in China to average 950 million square metres over the next 10 years. "There is potential for a cyclical rebound, even while we're talking about medium-term shrinkage," in the property sector, said Magnus.Property investment is expected to gravitate more towards wealthy coastal areas. Shanghai and four of China's richest provinces - Zhejiang, Jiangsu, Guangdong and Shandong - accounted for 49% of January-April investment, up from 39% five years ago.
JPMorgan analysts say this is "perhaps an intentionally chosen strategy to mitigate financial spillover risks." China introduced in May a new support package for the sector, cutting mortgage rates and downpayments and instructing local governments - already $9 trillion in debt - to buy "some" unsold apartments and turn them into affordable housing.