Real estate figures 'point to incipient stabilization'

China's real estate sector has seen signs of stabilization, said Ibrahim Chowdhury, the World Bank's acting lead economist for China.

"The latest (January) figures of housing sales and home prices seem to point to incipient stabilization in the sector," Chowdhury told China Daily in an exclusive interview. "This is consistent with the key message from the Central Economic Work Conference in December, which had a strong emphasis on maintaining economic stability."

According to the China Real Estate Index System, the average new home price in 100 major cities that it monitors stood at 16,179 yuan ($2,545) per square meter in January, down 0.01 percent from December. A total of 46 cities saw prices drop in January, compared with 58 cities in December.

The price of pre-owned homes was 15,987 yuan per sq m in January, down 0.08 percent from the previous month. Sixty-five cities saw prices drop in January, compared with 71 in December, according to the CREIS.

In the past few months, China's policymakers have started to fine-tune and adjust policies to provide some support to the real estate sector, including relaxing mortgage quotes, expediting mortgage approvals and loosening credit limits, to healthy developers.

"Going forward, China has some policy space to support the economy," Chowdhury said. "I think that policymakers would also need to closely monitor financial liquidity conditions. The real challenge is to do so without deteriorating balance sheets in the real estate sector and also in local governments."

Since real estate investment accounts for 20 to 25 percent of fixed asset investment, the sector plays a crucial role in the stable development of China's economy.

"In our view, given the government's focus on reining in financial risks in the sector, the growth in real estate investment will remain more subdued this year," said Chowdhury. "While on the upside, China has rebounded infrastructure investment, and the manufacturing capacity will also likely to be robust this year."

According to the World Bank's China Economic Update, the country's economic growth is projected to moderate to 5.1 percent in 2022, compared with 8.1 percent last year. Although the full-year growth is likely to slow down this year, the momentum will pick up, supported by a moderate easing of policy.

"I'm sure that PBOC (the People's Bank of China) would stand ready to provide liquidity when needed," Chowdhury added. "But I think it's important that policymakers continue with the de-risking and deleveraging efforts in the real estate sector."

The PBOC, China's central bank, announced in January that the one-year loan prime rate came in at 3.7 percent, down from 3.8 percent a month earlier, while the over-five-year LPR, on which many lenders base their mortgage rates, was lowered by 5 basis points to 4.6 percent.

Yu Yongding, an economist who served on the Monetary Policy Committee of the PBOC between 2004 and 2006, said at a seminar late in January that the nation should take a more aggressive monetary policy this year and also increase the coordination between monetary and fiscal policy.

According to the central bank's quarterly report released on Friday, China's new yuan-denominated loans totaled 19.95 trillion yuan in 2021, up 315 billion from the previous year. The outstanding total social financing, which measures all funds moved from the financial sector to the real economy, increased 10.3 percent year-on-year. In addition, the weighted average interest rate for enterprises stood at 4.61 percent last year, down 0.1 percentage point from 2020 and 0.69 percentage point from 2019.

The report said the prudent monetary policy will be flexible, more targeted and preventive, fully meeting the real economy's financing demand.