Ryan Woo and Liangping Gao

BEIJING (Reuters – China’s real estate market woes will worsen in 2018, with property prices staying flat, sales falling and investment plummeting further. The tighter COVID-19 curbs and tighter policies are weighing on fragile demand despite increased policy easing.

Last year’s government crackdown on developers borrowing excessively from the property market has weakened this pillar of the second largest economy in the world.

More than 100 cities have made efforts to stimulate demand by lowering their mortgage rates, lowering downpayments and offering subsidies since the beginning of 2011.

In the first half and all of 2022, the outlook for the real estate market will remain grim.

A Reuters survey of 13 economists, analysts and other professionals conducted between May 16 to May 23 found that average home prices would fall 1.3% on an annual basis. This is compared to a 1.0% decrease in a Reuters survey in February.

The full-year forecast suggests that home prices will remain flat, compared to a predicted 2.5% increase in the last poll.

Ma Hong, analyst at Zhixin Investment Research Institute, stated that the current national housing stock is currently in high phases and that tier-three- and tier-4 cities are under significant de-stocking stress due to slowing demand.

“The third quarter is expected to mark the turning point for home prices, with home prices in Tier-one cities and Tier-2 cities likely to see a rebound.”

The last Reuters survey also revealed that analysts are more optimistic about the supply and demand for housing than they were before.

Property sales will fall 25.0% during the first half of this year, compared to a decline in demand in February, which was 14.0%. For the entire year, sales will decline by 10.0%

The expected fall in investment by real estate businesses is 5.0% for the first six months and 2.5% overall. Analysts had previously predicted that investment would fall by 2.0% during the first half, and increase 1.5% by 2022.

Due to COVID-19, the frequent outbreaks caused the dim outlook on property prices and sales as well as investment.

Beijing, China’s capital, extended work-from home guidance to many of its 22,000,000 residents following the suspension of indoor gyms and dine in services. Shanghai is expected to lift the lockdown of two months during the first six months of June.

Shanghai’s housing market has been affected by the outbreak. Developers and agents have stopped operating and residents are under quarantine. This caused a significant drop in home sales.

China cut its benchmark mortgage reference rate by unexpectedly large margins on Friday. This was just a few days following a reduction in the mortgage interest rates of some homebuyers. It did this in an effort to support its property market.

To restore confidence in the market, analysts suggest that authorities adopt more supply-side policies.

Liu, who is a senior researcher at China’s most prominent property brokerage Centaline said that it takes only national measures to loosen restrictions on real estate financing and other steps such as shantytown development projects, to stabilise China’s property market.

(Here are other stories about the Reuters quarterly housing market polls.