China’s property market continues to slide, despite several rounds of monetary easing, an article from the Wall Street Journal explains. Data released Wednesday showed property prices fell more than 5% in February compared to the year earlier. Declines are widespread, with 47 out of 70 cities experiencing price drops more than the national average.
One of the country’s larger developers, Guangzhou R&F, was the most recent to take a hit. It eliminated its dividend policy, withholding a payout for the first time since 2005. Shares were down 5.6% at close. Similarly, rival Country Garden cut dividends as well. More are expected.
Spooked investors, who have caused the recent Chinese stock market downturn, are looking for a more intensive easing effort from Beijing to rescue the property market. One way would be a series of bank reserve requirement cuts, which seems more possible amid the recent data.
Source: http://www.wsj.com/articles/china-property-prices-roll-downhill-1426670216?mg=id-wsj
Well, my sense is the government is going to be slow to reassure real estate speculators. Unless the government starts buying up property, there’s no way to prevent a slide once one begins. For example, monetary easing doesn’t necessarily generate a buyer. That’s in part because low interest rates don’t offset credit risk: why would any financial institution want to lend to a developer on the ropes or a purchaser of potentially overpriced property?