China's property sector is getting closer to coming out of its prolonged slump

© Reuters. FILE PHOTO: Workers install windows for a residential building under construction, following the coronavirus disease (COVID-19) outbreak, in Shanghai, China, October 10, 2022. REUTERS/Aly Song

By Liangping Gao and Ryan Woo

BEIJING (Reuters) -China's property sector made fresh headway in its climb from a months-long slump as official data on Wednesday showed a much narrower decline in home sales, developer investment and construction starting in January-February.

Home sales by floor area fell 3.6% in the first two months of 2023 from a year earlier, according to data from the National Bureau of Statistics (NBS), compared to a 24% decline for 2022 as a whole.

The narrower decline in sales followed January's rise in new home prices, the first gains in a year, as buyers, while still cautious, found solace in a slew of supportive policies, expectations of more stimulus measures, and China's exit from China. devastating zero point. the COVID regime.

Property investment by developers fell 5.7% in January-February, improving from a 12% decline in December and a 10% drop throughout 2022.

Analysts expect property sales to be the first indicator to turn positive soon and see property investment recovering in the second half of 2023.

“The figure is a good start for the property market's recovery in 2023, and will further boost confidence,” said Yan Yuejin, an analyst at the E-house China Research and Development Institution in Shanghai.

“The property sales figure is expected to turn from negative to positive in the first quarter of this year, the biggest sign that the property market is recovering.”

Sentiment for China's property sector, for years the pillar of growth for the world's second-largest economy, has been battered by multiple crises since mid-2021, including a developer debt default and halted construction of pre-sale housing projects.

The lifting of COVID-19 restrictions and disbursing funds to developers to ensure delivery of pre-sale projects will increase demand, said analyst Ma Hong at Zhixin Investment Research Institute.

“Investment by developers, a leading indicator of market performance, is likely to pick up in the second half of this 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% in January-February from a year earlier versus a 44% decrease in December and a 39% decrease for 2022 overall.

Developer access to funds has also increased. Funds raised by developers slumped 15% in the first two months of 2023, compared with a 26% drop in the same period last year.

“Real estate companies are facing a peak period of debt repayment in the first half of this year, and will only have the will and ability to expand their investment after sales and financing grow,” said Ma Zhixin.

About half of the 30 Chinese developers registered in Hong Kong have defaulted or delayed bond payments.

At the start of the annual meeting of China's parliament this month, the government made guarding risks to top property developers one of its top priorities this year, but added that doing so would prevent unruly expansion by developers.