In a weekend note, Goldman Sachs China economists wrote that they are seeing persistent weakness in China's real estate sector, and there is no quick fix for them. The weaknesses are mainly related to lower-tier cities and private developer financing and are expected to drag on for multiple years. Goldman's economists predicted an L-shaped recovery in the property sector. A slow recovery rate and stagnant economic growth characterize an L-shaped recovery. - They expect China's government to introduce measures to support the sector in the form of easing credit conditions for buyers, cuts to mortgage rates and mortgage down-payments ratio, and relaxation of restrictions on home purchases.
- The economists believe the policy priority is managing the multi-year slowdown rather than re-engineering an upcycle.
- Many Chinese developers have defaulted on their payments as they find it hard to sell apartments and raise funds.
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