Vijdan Mohammed Kawoosa and Clare Jim

HONG KONG, (Reuters) – China’s property market has suffered a sharp decline in the last year due to a clampdown by the government on developers’ excessive borrowing and a COVID-19-induced slowdown.

More than 100 cities took steps this year to increase home buyer demand through lower mortgage rates, downpayments and subsidy. However, consumer confidence is still low as COVID regulations are being enforced by the government in numerous cities. da0e149e-23a0-4e72-8dd4-a14c212d6c9e1

(Home prices in China: https://graphics.reuters.com/CHINA-PROPERTY/znpneojorvl/chart.png )

The latest Reuters poll shows that China’s real estate market woes are set to continue this year. However, there will not be any growth in home values for the whole year.

Analysts believe the nation’s housing stock is high, especially in Tier-three and Four cities that are under heavy destocking due to slower demand. b06fba09-f006-4911-b9ad-242d20236d222

(Property sales by area in China: https://graphics.reuters.com/CHINA-PROPERTY/dwpkrnjnjvm/chart.png)

In April, property sales fell by around 16 percent despite additional policy measures to revive the sector.

Investors and analysts were not impressed by the further rate cuts made this month to help home-buyers ease their mortgage burden.

Fitch Ratings, which had previously forecasted a 10-15% drop in property sales, has lowered its projections for the value of these properties. They are expected to decline 25%-30% by 2022.

According to a Tuesday statement, financial regulators pledged that they would keep credit growth steady in the property market and assist homebuyers affected in COVID-19 virus outbreaks in deferring their mortgage payments. 24b6b938-f697-4de0-a8c2-b2231dd9df263

(Property investments in China: https://graphics.reuters.com/CHINA-PROPERTY/gdpzyenaxvw/chart.png)

Private property developers are tightening their belts after a downturn in sales, and have struggled to get funding. The regulators’ easing measures would not have an immediate impact on the market for many months, they claim.

Beijing is urging developers to accelerate their push for asset-light business models such as commercial real estate and property services. This will reduce dependence on the high-debt model that has been blamed in the liquidity crisis. a6c9e676-a3f3-407a-b0de-5c7221264ed24

(New construction in Chinahttps: https://graphics.reuters.com/CHINA-PROPERTY/gkvlgzjzzpb/chart.png)

From a year ago, new construction started fell 44.19% in April. This is the highest rate since the beginning of the pandemic in January-February 2020. Potential homebuyers faced uncertainty as developers slow down construction to save capital.

According to official data, loan growth dropped in April due to the pandemic that jolted the economy. Credit demand was also affected. A deep freeze of the market led to household loans and mortgages falling by 217 billion Yuan.