Two global credit ratings firms lowered their forecasts for China’s property market, as an accelerating slump in home prices hampers the country’s efforts to rescue the sector.
S&P Global Ratings now expects residential sales to drop 15 percent this year, more than the 5 percent decline it projected earlier. That would put sales below 10 trillion yuan (US$1.4 trillion), about half the peak in 2021, the ratings company said on Thursday.
Fitch Ratings on Wednesday cut its annual sales estimate to a decrease of 15 to 20 percent, worse than an earlier estimate of a 5 to 10 percent drop.
Photo: AFP
The ratings firms’ bleaker outlook suggests they have little confidence that recent stimulus measures would end the property slump that has been dragging the world’s second-largest economy.
The institutions blame a bigger-than-expected drop in home prices, which deters buyers.
Values of new homes fell the most in almost a decade last month, while used-home prices had the sharpest decline in at least 13 years, official figures showed last week.
Real estate accounts for about 78 percent of household wealth in China — double the US rate — and families typically save for years, and borrow from friends and relatives to purchase a home.
Separately, a measure of foreign direct investment (FDI) in China declined for the 12th straight month, underscoring Beijing’s struggle to improve its appeal to overseas investors to boost growth.
Inbound FDI in China dropped 28.2 percent in the first five months of this year from the same period last year to 412.51 billion yuan (US$56.8 billion), data released by the Chinese Ministry of Commerce on Friday showed. The figure was worse than the 27.9 percent drop in April and extended a streak since June last year.
The ministry said FDI fell in January-to-May mainly because of a high comparison base and reiterated authorities have increased efforts to attract foreign investment since the beginning of the year.
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