Ryan Woo and Liangping Gao

BEIJING (Reuters). Despite being shaken by a liquidity crisis among developers, China’s property market should remain weak in 2022. It will rebound in later the year due to policies aimed toward encouraging buyers.

The world’s second-largest economy was once a strong pillar, but the property sector, which is heavily indebted, collapsed last year after Beijing launched a deleveraging campaign. This caught several developers off guard, disrupting projects and creating a chilling effect on buyer sentiment.

China’s rapidly cooling property market has been a challenge. China also faces sporadic COVID-19 infections that may impact factory output as well as consumption.

A Reuters survey of 17 economists, analysts and other professionals conducted from February 16 to 23, found that average home prices will fall by 1.0% over the first half. This estimate is unchanged from the November Reuters poll.

Home prices will rise by 2.0% over the course of the year.

Li Qilin (chief economist, Hongta Securities), stated that home prices will rise if there are no curbs. He also said that the regulatory environment for real estate and credit have been marginally improved since the start of the year.

The economic and demographic benefits of first and second-tier cities will make property transactions far more efficient than those in third and fourth-tier places.

A number of steps have been taken by the authorities to increase sales and sentiment. They include making developers more accessible to pre-sale funds and requiring first-time buyers to pay smaller down payments.

According to Reuters, analysts feel more optimistic regarding housing demand and supply than they did in their last survey. However, sentiment has not completely recovered and real-estate firms are still under financial stress.

Property sales slumped 14.0% in the first quarter, a decrease of 16.0% from November’s poll. For the entire year, sales are forecast to fall 7.5%.

A majority of respondents stated that the policies controlling demand (especially genuine) will be relaxed, however, for now, sellers rely on discounts.

Huang Yu, Vice President of China Index Academy (a Beijing-based property institute), stated that “home buyers have not been restored their confidence and that discounts remain a major marketing tool.”

The increase in home sales in first- and second-tier areas will drive a rise in national home prices.

China’s housing minister pledged Thursday to preserve the stability of China’s real estate market and meet genuine demand.

The expected decline in investment by real estate businesses is 2.0% for the first half, and a gain of 1.5% overall. Reuters forecasted that investment would decline 3.0% during the first half 2022.

The slowest rate of growth in property investment in 17 months was 4.4%, but real estate sales rose by 1.9%.

Lu Wenxi (chief analyst at Centaline), stated that “real estate companies under capital pressure” will be cautious about land purchase and property investment.

Daniel Yao (head of research China for JLL), a provider commercial property services, expects that authorities will issue more loans for property firms to develop projects, and they will allow them more freedom to issue bonds to ease liquidity and stabilize the outlook.

13 of the 17 people surveyed said that China would delay implementing a pilot real estate tax because it is facing economic difficulties.