China’s Stimulus Strategy: A Fitch Analyst’s Perspective on Housing Market Recovery Amidst Income Deficit and Waning Confidence

Will China's economic stimulus be able to restore trust and address the income shortfall in the housing sector?

A Fitch analyst predicts additional support actions in the upcoming quarter to ensure that Beijing's most recent financial stimulus realizes its objectives.

Beijing struggles to rectify the issues that have emerged since the implementation of the "three red lines" policy in August 2020. The ensuing disaster caused by the Covid-19 pandemic has further deteriorated real estate values, disposable income, and most importantly, eroded the trust of potential homebuyers.

This situation leaves Kang Chao, a 33-year-old insurance expert from Changsha in the southern region of Hunan province, in a quandary. He finds the People’s Bank of China (PBOC)’s choice to reduce down payments on second properties and existing mortgage rates to be "very appealing". However, his current financial status nearly precludes him from beginning the search for a new property.

"He revealed that his earnings have decreased nearly 30% from the previous year due to his company's difficulties, resulting in a significant reduction in his purchasing ability. He also mentioned that decreased mortgage expenses aren't providing sufficient additional funds to purchase a second home.

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