Property push

Property related stocks in Shanghai and Hong Kong have surged in the last couple of days due to rumors of coming changes in central government with the aim of turning around market sentiment. The property market is at the heart of China’s domestic economy, and more than 80% of all assets held by Chinese people are in the form of property, but the prices and valuations of property have been falling steadily and this is a big problem. For years people told each other that China’s property market was a bubble, but one made of iron and steel that could not pop. The whole thing was fuelled by local government officials, property developers and state banks operating in concert to keep the roundabout moving. But then it stopped, and the bubble did burst. Finding a way to solve the problem, that is, reignite confidence and to create the perception that prices tomorrow will probably be higher than prices today, now that is a difficult task.

The rumors are that the Central Urban Work Conference will meet and approve measures to shift fundamentally the state of the market. But the property market has proved to be remarkably intractable. Oversupply is a major problem in almost all parts of the country, although not so in the top end of the markets in Shanghai, Beijing and Shenzhen. Prices have come down significantly since peaking around 2021, but the overall state of China’s economy, which is parlous, geopolitical uncertainties and a lingering sense that basic policies are unlikely to change, has made consumers very reluctant to return to buying. The Center has been announcing new measures regularly since last September at least, with no significant impact so far. It’s never smart to bet against these guys, but we are watching the situation. Meanwhile, have a great weekend.