Revival of residential property sales heralds economic glad tidings

So, there are quite a few reasons that allow us to back expectations of a revival in the home property market. Implementation of supportive policies in accordance with each city's conditions is going to be one of the drivers of Chinese real estate market at the moment.

Since the Central Economic Work Conference held in 2016 formulated the principle that "homes are for living in, not for speculation", the central government has been reiterating it from time to time. Local governments keep a close eye on home purchases to maintain stability in the market.

Thus, strict implementation of the central government guidance over the last couple of years has effectively eliminated residential property sales fluctuations across the nation.

In fact, thanks to the tightening of measures by local governments in accordance with their circumstances, 31 second-tier cities' new home and pre-owned residential prices have slowed their growth rate for 13 months in a row. And 35 third-tier cities experienced 14 consecutive months of flat prices or slowing home price growth.

Governments of Shandong province and the city of Nanjing in Jiangsu province eased their measures to allow talented professionals to apply for permanent resident status. There are also cities like Jiaxing in Zhejiang province and Nanning in Guangxi Zhuang autonomous region that relaxed measures relating to the housing provident fund.

Such developments are expected to underpin the rebound in home sales in the future. Going forward, the downtrend in Chinese interbank rates is expected to trickle down to the credit market, and lead to subsequent interest rate changes on home mortgages.

The recent spike in broad money supply and the expansion of social financing will provide a benign financial environment for the real estate market revival.

So, we believe that after a period of spontaneous corrections after the outbreak of COVID-19, there is plenty of room for real estate sales to rally. This is big deal, given the property sector's significance in the larger macroeconomic context.

The writer is a member of the China Finance 40 Forum and chief economist of Changjiang Securities. The China Finance 40 Forum is a non-governmental, non-profit, and professional think tank dedicated to policy research on economics and finance.