China’s economic headwinds chill its wary new homebuyers

BEIJING, June 6 — After two years of hunting, Volar Yip has put his dream of buying a new home in China’s south-eastern city of Foshan on ice, anxious about making a major financial commitment amid a significant slowdown in the world’s second-largest economy.

The growing caution among young buyers in China’s battered property market, which accounts for a quarter of gross domestic product, presents a major challenge for policymakers in Beijing now scrambling to revive housing activity. For Yip, the mortgage rate cuts would save him around 400 yuan on each month’s instalment for a residential apartment worth 2 million yuan that he’s looking for.Property developers, who had hoped for the market to bottom out in the second quarter, revised down investor expectations for full-year sales after the plunge in the first five months, with no demand rebound seen in the near future.

In an effort to boost home purchases, China last month cut its benchmark rate for mortgages more than expected, one week after it lowered the mortgage rate floor for first-time home buyers. “The Omicron wave and draconian lockdowns in around 40 cities have significantly limited mobility, employment, income and the confidence of Chinese households,” said Nomura chief China economist Ting Lu.

A credit crunch in the property sector, triggered by tighter debt caps, has pushed some firms such as China Evergrande Group, the world’s most indebted developer with more than US$300 billion in liabilities, into default.Andy Lee, CEO at realtor Centaline China, said current buyer sentiment is worse now than the end of last year when credit conditions were even tighter.

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