Global banks see gains ahead for China’s property stocks, with some projecting increases of close to 20 per cent for certain developers this year, driven by record-low mortgage rates and stronger policy support as Beijing seeks to bolster growth amid tariff challenges.
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“The convergence of low rates, a supply squeeze and credit normalisation present a cocktail of conditions that are driving a structural property market recovery,” HSBC analysts said in a report on Wednesday.
Interest-rate cuts had reduced developers’ borrowing costs and lifted profitability, especially for state-owned firms, they said. Meanwhile, a decade-low mortgage-to-income ratio had created a favourable environment for investment and valuation, they added.
The London-based bank raised its target price for five mainland developers – state-controlled China Overseas Land & Investment, China Jinmao and China Resources Land, as well as Greentown and Longfor – by an average of 9 per cent, implying an 18 per cent upside.
The property sector, once accounting for close to a quarter of China’s economy, has been in a rut since a nationwide campaign called the “three red lines” was implemented in late 2020 to rein in debt among weak developers and deflate a housing bubble.
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Chinese authorities have rolled back punishing measures and reiterated support for the sector as the slump persists into its fifth year. Premier Li Qiang said last week during State Council executive meetings that the country would continue to “push forward with the stable and healthy development of the property market”, while boosting consumption and supporting the equity market.