China’s property rescue expected to deliver just small GDP boost, survey shows

BEIJING - China’s most forceful attempt to shore up its beleaguered property market is expected to improve growth prospects modestly in 2024, according to economists surveyed by Bloomberg.

Seven out of 12 respondents to a flash survey said the rescue package unveiled on May 17 will give a boost of between 0.1 percentage point and 0.3 percentage point to gross domestic product (GDP) in 2024.

Four economists expect a contribution of less than 0.1 percentage point, while one saw no impact from the policies. The median forecast for growth in 2024 edged up to 4.9 per cent.

The support package announced by Beijing includes lower down payment requirements for home buyers and 300 billion yuan (S$56.9 billion) of central bank funding to help the local authorities buy excess inventory from developers. Those properties would then be converted into affordable housing.

“The specifics of the rescue package amount to rather measured support,” said Ms Erica Tay, an economist at Maybank Investment Banking Group. “But this might be the first salvo, with more to come.”

While the efforts signalled a renewed commitment to tackle one of the biggest drags on the Chinese economy, the funding announced was only a fraction of what some analysts say is needed to address the supply-demand mismatch in housing.

“Even if prices establish a trough this year, there is still a high level of housing inventories which will take time to work through,” said Mr Lynn Song, Greater China chief economist at ING Bank. “Before these inventories are normalised, it is difficult to expect a significant turnaround in real estate investment and construction activity, which is the primary direct impact on GDP growth.”

Economists expect the People’s Bank of China to cut the reserve requirement ratio (RRR) for banks by 25 basis points before the end of June, a move that would release cash for loans and investment.

But they do not expect the central bank to cut its one-year policy rate before the third quarter. May’s survey had predicted a cut by the end of June.

The Communist Party’s Politburo has called for the “flexible use” of policy tools including interest rates and the RRR to lower funding costs, boosting expectations for more monetary support to meet the target of around 5 per cent economic growth in 2024.

Economists in the survey raised their GDP growth outlook slightly, expecting 4.9 per cent in 2024 and 4.5 per cent in 2025. BLOOMBERG