China home sales set to disappoint in January, could fall by up to 15 per cent in 2024, CGS-CIMB Securities says

China home sales set to disappoint in January, could fall by up to 15 per cent in 2024, CGS-CIMB Securities says

China home sales set to disappoint in January, could fall by up to 15 per cent in 2024, CGS-CIMB Securities says

Home sales in 30 major cities tracked by Chinese financial data provider Wind have dropped by 38 per cent month on month and 10 per cent year on year in the first three weeks of this month, according to analysis by financial brokerage CGS-CIMB Securities.

In China’s tier-two and tier-three cities, homes sales are expected to log a decline of 42 per cent for the whole of January, compared with last month, with the new homes market suffering the biggest losses, CGS-CIMB said. Tier-one cities, meanwhile, might record a 21 per cent month-on-month slide despite recent easing policies.

“These estimates – if realised – imply that the China property sector could approach our bear market scenario, in which we estimate that property sales in China could fall 10 to 15 per cent this year, versus an initial base case of an about 5 per cent decline,” said Raymond Cheng, CGS-CIMB’s managing director.

The bearish forecast comes after Chinese authorities last week reported a set of lacklustre December home price data for 70 major cities, with new home prices recording their steepest monthly decline since February 2015.

The CGS-CIMB forecast also includes an annual drop of 3 to 5 per cent in home prices this year and annual industry sales of between 8 trillion yuan (US$1.1 trillion) and 9 trillion yuan, down 55 per cent from a peak in 2021.

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To reverse the current, very weak market sentiment, more aggressive policies, such as intervention by the central bank, are needed to change homebuyers’ cautious stance on the property market, Cheng said.

“Dragged down by weaker-than-expected sales, most investors are expected to continue to stay away or further trim their positions in the China property space,” he added.

In a research note published on Monday, British multinational bank Barclays said the contraction in property sales could be wider after falling by 40 per cent year on year in the first half of January. Barclays was citing Wind’s high-frequency indicators.

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“[The] property sector also remains a significant drag on the economic recovery,” Barclays analysts led by Christian Keller said in the note.

With no signs of significant new stimulus measures on the horizon, and in light of the sluggish home sales data, a worsening labour market and weak consumption outlook, Barclays has revised down its growth forecast for the first and second quarters this year by 0.2 percentage points quarter on quarter. It forecasts 4.4 per cent growth for the first quarter and 4.9 per cent for the second quarter, according to the research note. Its full-year growth forecast stands at 4.4 per cent.

At least seven global institutions, including UBS, Goldman Sachs and Fitch Ratings, have previously forecast that China’s national home transactions will fall by up to 5 per cent in 2024, adding to a 10 per cent drop last year.

Any decline in China’s property sector will represent “the biggest risk” to its economy, Wang Tao, UBS’s chief China economist, said at a media briefing this month.

“There is still considerable risk that it will have an impact on residents’ confidence and do harm to the stability of the country’s economy, if the real estate sector goes down further.”

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