This month, Chinese regulators finally rolled out a rescue package to ease a severe liquidity crunch for local embattled property developers. However, the big question now is where’s the demand.

According to Bloomberg, after the regulators encouraged financial institutions to provide more support for the troubled real estate sector, relevant assets rallied over the past several weeks.

The bailout measures helped address everything, from developers’ liquidity problems to the use of presales funds.

Such efforts were lauded by investors, but the optimism was short-lived.

Some days later, a latest government report showed new home prices fell for a 14th month in October, with the biggest slump in seven years. The existing home prices also dropped the most since 2014.

In addition, Moody’s Investors Service forecast China’s property sales would decrease 10 to 15% by the end of 2023.

In its report on November 18, Moody’s said that China’s rescue measures will only “slowly take effect and lead to a gradual recovery.”

Other experts also expressed concerns about the collapsing home demand in China.

Yewei Yang, chief bond analyst at Guosheng Securities, said, “Under the current policy, changes on the demand side remain to be seen, and thus the magnitude and sustainability of the improvement in credit conditions of real-estate companies also needs to be continued to be observed.”

Zerlina Zeng is an analyst at Creditsights Singapore LLC. She said, “I don’t think the support measures are adequate as long as home-buyers’ sentiment and contracted sales remain depressed.”

She added, “Most of the measures are targeted at containing systemic and tail risk rather than bailing out bondholders.”

She said that it will take time to see the real transmission of the rescue measures.

The support measures were introduced on November 11 by the People’s Bank of China and the China Banking and Insurance Regulatory Commission, two of the country’s top regulators.

The 16-point measures will help property developers secure more money from home presales, the sector’s biggest source of funds.

Bloomberg, citing industry analysts, said that the rescue package will mainly benefit private developers that have yet to default.

In a research note, Chang Wei Liang, a macro strategist at DBS Bank in Singapore, wrote, “Policy guidance on extending loan terms and bond repayments should help larger and financially stronger developers.

Meanwhile, the strategist said that Chinese entities that have already defaulted, or are already teetering on the edge of default, are not likely to benefit.

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