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Falling demand will be a challenge for Chinese Real Estate Market



China's real estate developer bailout policy was finally launched this month to ease a severe liquidity crunch.  However, the barrier of falling domestic demand can be a big challenge.

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China's real estate developer bailout policy was finally launched this month to ease a severe liquidity crunch.  However, the barrier of falling domestic demand can be a big challenge.

Assets related to China's real estate sector have surged in price over the past two weeks after regulators launched supportive measures ranging from liquidity issues to allowing real estate companies to use deposit source from customers.

Falling demand will be a challenge for Chinese Real Estate Market

While these efforts have cheered real estate investors, a report this week showed that new home prices fell for a 14th month, while Moody's predicts that China's real estate sales will fall as much as 15% in the coming year.  

Financial support measures launched over the past week made Chinese real estate stocks soaring and put Hong Kong's stock index into a bull market.

Chinese regulators issued a 16-point plan to boost the real estate market on November 11, and authorities followed that plan on November 14 by allowing real estate developers to access more funds from client deposits.

However, optimism cooled after a government report showed that home prices in October fell by the most in seven years.  According to the National Bureau of Statistics, new home prices in 70 cities fell 0.37% compared to September.

According to a recent Moody's report, China's contracting real estate sales will decline by 10% to 15% in 2023, and recent measures to support the real estate market will slowly have effect and lead to a gradual recovery.

Rating agency Fitch Ratings this week said that it kept its forecast for an almost unchanged trend in new home sales in 2023 even after the latest financial support measures.

Housing demand depends on a recovery in homebuyer psychology and employment prospects which is believed to depend on China's sustainable easing of pandemic-related control measures, said Fitch Ratinsg.

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According to analysts, this month's real estate market rescue package will mainly benefit Chineseprivate real estate developers who have not yet defaulted.  Country Garden Holdings Co., a real estate developer, will be the first company to take advantage by issuing shares after the information about the financial support package.

Falling demand will be a challenge for Chinese Real Estate Market

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