China's housing market: Is the bottom in sight?

China’s real estate sector remains in turmoil, with many wondering if the worst is over. According to Bill Winters, CEO of Standard Chartered, the pain may not be over yet.

In an interview with CNBC, Winters expressed caution, noting that while there are occasional signs of increased activity, it doesn’t appear that China’s housing market has truly hit bottom in terms of prices.

Global confidence in investing in China remains low, primarily due to the ongoing struggles in its property market, Winters pointed out.

Despite some economic growth earlier this year, the outlook for China’s housing market—and its overall economy—remains uncertain.

China’s economy to grow by only 4.5%

After a strong start to 2024 with 5.3% growth in the first quarter, China’s economic momentum slowed significantly to 4.7% in Q2.

The slowdown has sparked concerns of a prolonged economic slump, especially as China grapples with challenges in the real estate sector.

To counter the decline, the Chinese government has introduced several measures, including trimming loan rates and offering mortgage refinancing to lower borrowing costs for homeowners.

However, these steps have not been enough to restore confidence in the market.

Bank of America recently lowered its forecast for China’s GDP growth in 2024 from 5.0% to 4.8%.

Additionally, the investment bank now expects China’s economy to grow by only 4.5% annually over the next two years, down from its previous estimate of 4.7%.

Can mortgage refinancing lift China’s housing market?

Despite growing pressures, China has resisted launching a massive stimulus package, largely out of concern for its ballooning debt levels.

Bill Winters believes that while the Chinese government’s measured response may be uncomfortable in the near term, avoiding excessive stimulus will benefit the country’s fiscal health in the long run.

This restraint, however, could prolong the real estate sector’s recovery. Standard Chartered is not the only institution predicting more downside for China’s housing market.

Earlier this month, JPMorgan’s chief China economist, Haibin Zhu, echoed concerns about the property market’s outlook.

On CNBC’s “Squawk Box Asia,” Zhu stated that home prices in China are unlikely to stabilize before 2025.

In August, new home prices saw only a modest 0.11% increase, down from 0.13% in July, while resale home prices dropped by 0.71% month-over-month, according to the China Index Academy.

Zhu cautioned that while mortgage refinancing may help free up consumer spending, it is not likely to revive the housing market. He said:

As China navigates these economic challenges, investors remain wary. Without a clear bottom in sight for housing prices and with the government’s reluctance to introduce aggressive stimulus, the market may face continued uncertainty.

Analysts warn that while some policies may free up consumption, a full recovery of China’s real estate sector could take years.