Goldman on floating the Chinese property Titanic.
Echoing our recent discussion Focus shifting to the secondary market and “Stage II easing”, and in light of the potential ASP pressure exerted by increasing secondary supply and negative feedback loop, we have overhauled our China property
barometer 2024 (past publications here) to closely encapsulate the latest household demand and supply-side industry liquidity changes (more detailed explanation in our first vol.). Over the past month, we find:
Demand: overall our composite demand scored 39 out of 100 in 2H-Apr to MTD May 2024 (Exhibit 1), c.20% away from the historical mid-cycle level, with a) fundamental home buyers’ affordability continued improving at the cost side (comparable to early-2017 levels) and early signs of Stage II policies intensifying with a growing number of municipalities adopting the “trade-in” policy (more details). According to CRIC, YTD 54 cities had issued “trade-in” or related policies vs. 30+ before April 30; while b) sentiment-wise, we note: 1) “Ne home search demand heat index”, following Apr’s softening, sequentially picked up in MTD May in all city tiers, suggesting higher interest from prospective home-buyers to enter into the market, though the actual conversion to incremental sales might need time; and 2) secondary listing volume moderated in Apr, echoing the accelerated turnover pace in all city tiers, implying sequential secondary sentiment improvement; on the other hand, the Apr secondary housing prosperity index dipped post Mar’s spike and agent expectation on price (CSI) in MTD May was uninspiring.
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