China’s housing market crash isn’t over yet, says JPMorgan economist
China’s struggling housing market will continue to weaken as a series of government stimulus and support measures have not been “adequate” in supporting the sector, according to a JPMorgan economist.
“The housing market crash is not over yet,” Haibin Zhu, chief China economist at JPMorgan, told CNBC.Squawk Box Asia“Second, home prices won’t stabilize until 2025 at the earliest.
The average price for new home sales China’s industrial production across 100 cities rose a modest 0.11 percent from July, slowing from June’s 0.13 percent growth, according to data released by the National Bureau of Statistics. China Index Academy Saturday. Resale home prices fell 0.71% month-over-month, the report said.
The average price of both new and resale homes fell 1.76% and 6.89% year-on-year, respectively, as the country’s housing market remains deep in crisis.
Bloomberg reported Saturday that China is considering a Homeowners’ mortgage loan reduction plan by allowing refinancing of up to $5.4 trillion in mortgages.
But analysts are skeptical that the proposed measure will be effective in boosting homebuyer sentiment and overall consumption.
“Some people think it will free up consumption — that’s just one side of the story,” said Winnie Wu, China equity strategist at BofA Securities. Lower mortgage rates will prompt banks to cut deposit rates to protect their profit margins and ensure stability in the financial system, she said, noting that falling deposit rates will eventually cut interest income from household savings.
Mortgage refinancing will also do little to spur demand for new homes, according to JPMorgan’s Zhu.
“Even if mortgage refinancing were implemented, it would not be a housing market recovery policy,” he said, adding that the policy “has nothing to do with new home demand, it mainly benefits existing homeowners.”
“Cutting interest rates is not the best policy, squeezing banks’ profit margins will not have much effect,” said Wu of BofA Securities, adding that the government needs to “create a positive feedback loop instead of this downward spiral.”
