Hong Kong property stocks surged as private data revealed a narrowing decline in year-on-year sales for major Chinese developers in June. The Hang Seng Mainland Properties Index rose 3.5% by midday, driven by gains in companies like Longfor Group and Shimao Group. This comes after a multi-trillion yuan government support package aimed at stabilising the property sector. Data showed a 36.3% month-to-month sales increase among China's top 100 developers. CRIC predicts further improvement, with more home purchases expected in July. However, the long-term impact of the support package and the performance of smaller developers remain uncertain.
Hong Kong stocks in the Chinese property sector jumped significantly. This rise comes after private data showed a narrowing decline in yearly sales for major Chinese property developers in June.
The Hang Seng Mainland Properties Index, a key benchmark for mainland China property stocks listed in Hong Kong, raised 3.5% by midday. This increase follows an earlier jump of nearly 5%. Individual companies also saw significant gains, with Longfor Group, Shimao Group, and Agile all rising over 5%. State-owned China Resources Land and private developer CIFI Holdings saw increases exceeding 4%.
The market is closely watching the impact of a major government support package launched in mid-May. This multi-trillion yuan package aimed to stabilise the struggling property sector, which has been facing financial difficulties since 2021 due to a liquidity crunch and defaults by many firms.
Data from property researcher CRIC shows some positive signs. Sales value at China's top 100 real estate developers increased 36.3% from May to June. While there was still a year-on-year decline of 16.7%, this is a significant improvement compared to the 33.7% drop seen in May - a narrowing of 17 percentage points.
Interestingly, CRIC's data also reveals a polarisation within the sector. Nearly a third of the top developers, mostly state-owned or state-backed companies, actually saw year-on-year sales gains in June. This suggests that the government's support measures, which may include easier access to credit, may be benefiting these larger firms more readily.
CRIC predicts further improvement, with more home purchases expected due to the support package. They also believe the year-on-year sales decline will continue to narrow in July, partly due to a lower sales baseline from the previous year. Another property research firm, China Index Academy, reported that average new home prices across 100 cities edged up slightly (0.15%) in June compared to May. This is the slowest pace of price growth in five months.
Overall, the recent stock market surge and narrowing sales decline suggest a potential turnaround for the Chinese property market. However, it's still early to say definitively. The long-term impact of the government's multi-trillion yuan support package and the health of smaller developers remain to be seen.
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