HomeTrendingChina's state media slams property sector amid economic decline

China’s state media slams property sector amid economic decline

According to a Wednesday editorial in the state-run Economic Daily, China should uphold the premise that “houses are for living in, not for speculation” for the time being, despite the property market’s catastrophic economic downturn.

The phrase was first used by China’s senior leaders in late 2016 when they started enacting more regulations for the real estate market. Its removal from the Politburo statement in July was interpreted as a sign that some of those restrictions would be lifted.

“The positioning of ‘houses are for living in, not for speculation’ should be insisted on and it is not out of date,” the Economic Daily said in an editorial.

“In some popular cities, housing demand still exceeds supply. Once speculation on house prices resumes, China may go back to the old path of the over-reliance on the real estate sector, which will have adverse impacts on economic and social development.”

In response to significant changes in the interplay between supply and demand in the real estate market, top leaders stated China would promptly alter and optimise its property regulations.

Investors are expecting more and stronger stimulus to stimulate the housing market as a result of the mounting danger of default among some developers and the faltering economic recovery.

However, they were dismayed to learn that the People’s Bank of China (PBOC) kept the prime rate for five-year loans unchanged on Monday. Mortgage rates are influenced by the five-year rate, and several analysts speculated that the central bank may be attempting to protect lender margins.

According to the Economic Daily, property ownership accounts for 60% of Chinese household wealth and accounts for 40% of bank lending in China.

According to a note released on Wednesday, Goldman Sachs analysts project that the housing industry will be a 1.5 percentage point drag on China’s GDP growth this year and will probably continue to be at least marginally negative going forward.