China’s cautious approach to property policy easing gained significant traction following the April politburo meeting. Notably, the new measures resemble the successful policy actions of 2008 and 2015, both of which led to "V" shaped property recoveries. Although the current macroeconomic environment presents more challenges, these measures could still provide a stabilizing effect on the property market.

China new household long term loans
RMB billions, trailing 12-month aggregate, 2008–present

China new household long term loans over the trailing 12 months, since 2008.
Source: Bloomberg, Principal Asset Management. Data as of April 30, 2024.

Investors initially welcomed China's July 2023 politburo meeting as a watershed moment for the country's property sector. Policy intent shifted from alleviating property developers' financing difficulties to stirring up home demand. However, progress has been disappointingly slow, with home prices and transaction volumes sliding further, casting a cloud on China's fragile economic recovery.

Policymakers now appear to be finally matching action to words. After the most recent politburo meeting in April, policy momentum accelerated with the easing (and, in some cases, removal) of home purchase restrictions across cities. More significantly, down payment ratios and mortgage rates were cut to the lowest levels in history. The government has also started buying unsold properties directly and transforming them into public housing.

The recent stimulus measures are comparable to those in 2008 and 2015, which led to soaring home prices and sizeable credit expansion. However, the macro environment this time is more challenging. Despite a significant build-up in excess savings and ample property inventory, household income prospects and confidence remain low, suggesting the policy measures may be less impactful.

While the new policy measures may not trigger a credit expansion, as they have previously, they should at least stabilize the property market—the key precondition for an economic turnaround. Negativity towards China has been extreme, but with economic prospects now improving, China presents a compelling investor opportunity.


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