SHENZHEN, CHINA – MARCH 9: View of tall commercial and residential buildings on March 9, 2016 in Shenzhen, China. The general economic slowdown in China continues, while the property price and stock bubble is at risk. (Photo by Zhong Zhi/Getty Images)
Zhong Zhi | Getty Images News | Getty Images
Shares of most Hong Kong-listed Chinese property stocks rose to their highest in over a year as China's economic recovery continues.
The real estate sector was the biggest gainer in the year Hang Seng Indexwith Longfor Group Holdings the top performer, up over 25%.
The shares of other real estate developers also rose significantly. Defaulted developer Shimao Group surged over 97%, while Kaisa Group gained 45.48%, both hitting their highest prices in more than a year.
China Overseas Land & Investment also rose 14.33%, reaching its highest level since last September. China Vanke rose 45.5%.
Hang Lung Properties and China Resources Land gained 12.65% and 7.68%, respectively.
The broader Hang Seng Index gained 5.46%, while the Hang Seng Mainland Properties Index gained over 11.69%. Markets in mainland China are closed for the Golden Week holiday.
The continued drag on the real estate sector will result in a significant decline in demand, keeping growth below target.
Over the weekend, major cities in mainland China introduced easing measures to boost homebuyer confidence after the central bank launched a series of policy stimulus initiatives last Tuesday.
The Guangzhou city government announced that all restrictions on home purchases would be lifted starting Monday. Shanghai's shortening of the required tax payment deadline also took effect on Tuesday. Shenzhen has also eased purchase restrictions, allowing buyers to purchase another home in select districts.
“Investors are betting that recent policy easing will lead to a recovery in the domestic market, which should help developers with sales and prices,” Gary Ng, senior economist at Natixis, told CNBC. Still, he sees challenges in achieving these expectations, especially given inventory pressures in non-Tier 1 cities.
“If home sales don’t improve in the next few weeks, they may go back to zero,” he said.
While these measures will help stabilize the housing market, raising prices and reviving demand will be a major challenge, Morgan Stanley wrote in a note published on Wednesday.
“The ongoing drag on the real estate sector will leave a significant dent in demand, keeping growth below target,” the investment bank’s Asia-Pacific economists wrote.
Real estate used to account for over 25% of China's GDP, but since 2020 the property market has faced a sustained decline following Beijing's crackdown on the sector's excessive debt.
Chinese officials have increased support to ease financial pressure on households and stabilize the competitive real estate market. However, these previous initiatives have not resulted in significant changes.
“There are further signs of stabilization, but that does not change the fact that China's real estate sector has entered the twilight of the rapid growth era,” Ng said.