China's battered real estate market will continue to experience weakness as a series of government stimulus and support measures have failed to support the sector “satisfactorily,” says a JPMorgan economist.
“The housing market crash is not over yet,” Haibin Zhu, chief China economist at JPMorgan, told CNBC's “Squawk Box Asia” on Monday, adding that property prices would not stabilize until 2025 at the earliest.
The average new home price in 100 Chinese cities rose a modest 0.11 percent from July, further slowing from June's 0.13 percent growth, according to data released Saturday by the China Index Academy. Home resale prices fell 0.71 percent from the previous month, the report said.
Average prices for both new and used homes fell by 1.76 percent and 6.89 percent respectively compared to the previous year, as the country's real estate market remains deeply in crisis.
Bloomberg reported on Saturday that China is considering a plan to lower borrowing costs for homeowners by allowing the refinancing of up to $5.4 trillion in mortgages.
However, analysts are skeptical whether the proposed measure can boost home buying sentiment and overall consumption.
“Some people think it will boost consumption – but that's only one side of the story,” said Winnie Wu, chief China equity strategist at BofA Securities. Lower mortgage rates would prompt banks to lower deposit rates to protect their margins and ensure the stability of the financial system, she said, noting that lower deposit rates would ultimately lead to interest income on household savings.
According to JPMorgan's Zhu, the measure to refinance mortgages would also do little to increase demand for new homes.
“Even if the mortgage refinancing policy is implemented, it is not a policy to revive the housing market,” he said, adding that the policy “has nothing to do with the demand for new homes, but primarily benefits existing homeowners.”
“Cutting interest rates is not the best strategy. Squeezing banks' margins won't do much good,” said Wu of BofA Securities, adding that the government needs to “create a positive feedback loop and not this downward spiral.”