Shares of Chinese property developers surged as Beijing announced robust measures to support the struggling property market.
Chinese real estate stocks jumped as much as 9.9% following the mid-Friday announcement. The index has climbed more than 20% this week, marking its best performance since November 2022.
Shares of Longfor Group Holdings Ltd. closed 11% higher in Hong Kong, while China Vanke Co. and Sunac China Holdings Ltd. soared 19% and 26%, respectively.
The authorities removed the mortgage rate floor and lowered the minimum down-payment ratio for individual homebuyers to stimulate property demand.
Additionally, local governments were encouraged to purchase homes for conversion into affordable housing, marking one of the strongest initiatives yet to revitalize the country’s ailing real estate sector.
“The lowering of the down-payment ratio is beyond market expectations, while scrapping the minimum mortgage rate is well expected by the market,” said Shujin Chen, head of China financial and property research at Jefferies Hong Kong Ltd.
“Investors are more willing to chase property stocks on speculation of a series of upcoming supportive policies before the Third Plenary Session in July,” she added.
Policymakers are accelerating efforts to revive home demand and address excess supply as the property crisis deepens. The real estate sector has been a significant drag on the economy, and its recovery is deemed crucial for the stock market rebound to sustain.
New-home prices in 70 Chinese cities, excluding state-subsidized housing, fell 0.58% in April from March, the steepest decline in a decade. China’s home sales plummeted about 47% in the first four months of this year, while unsold inventory remains at an eight-year high.
Despite the encouraging policies, Jefferies’ Chen noted that fundamental challenges persist if the market continues to expect a downward trend in home prices.
China Vanke Co. was the second most traded stock on the mainland on Friday, but short interest in its Hong Kong-listed shares was at its highest in over a year, indicating some investors remain skeptical about the recent rally.
