Economic Sentiments at Shenzhen Property Fair

By David Kirton and Nicoco Chan

SHENZHEN, China (Reuters) – Chinese finance professional Zhang Jing, 28, considers purchasing his first home post-stock market rally but wants clearer government guidance first. He believes that owning a home may enhance his marriage prospects, yet remains hesitant without solid economic policies.

At a major property fair held in Shenzhen, buyers, investors, and consumers expressed tepid interest amid hopes for economic stimulus while avoiding large purchases crucial for economic recovery.

Minister of Finance Lan Foan announced plans to “significantly increase” government debt to stimulate the economy, though specifics on timing and scale were lacking, leaving many disappointed. Analysts stressed that additional debt needs parliamentary approval in upcoming weeks, yet the fragmented announcements contrast with the urgent need to meet China’s 5% growth target amidst deflationary pressures.

Economists highlight a need for 2 to 3 trillion yuan ($283 to $424 billion) in fiscal stimulus, with some even calling for a larger sum to maintain the market rally.

A pivotal contributor to China’s economic slowdown is the ongoing decline in the real estate market, which represents about a quarter of economic activity at its peak in 2021.

Recent policy shifts sparked renewed interest primarily from first-time buyers like Zhang. The central bank lowered interest rates and injected 1 trillion yuan into banks, while cities like Shenzhen and Shanghai lifted nearly all home-buying restrictions. These actions momentarily boosted Chinese stocks to two-year highs, but uncertainty over the details led to a downturn.

During the Oct. 1-8 holiday, property sales surged by 23% from last year. In Shenzhen, prices have dropped approximately 40% from their peak, leading to a 664% year-on-year rise in new home sales contracts during the holiday period, according to the city’s housing authority.

At the fair, some property sellers remained skeptical about sustaining improved sentiment. Chen Gengtao, a sales manager, noted a noticeable uptick in buyer interest in central apartments, but expressed concerns about the future due to trade tensions and job losses affecting buyers’ ability to purchase homes.

Despite a 5% growth rate, many young consumers feel disheartened with average pay in major cities declining, leading to high youth unemployment.

Conversely, some fair attendees, like 54-year-old financial consultant Wang Yali, felt optimistic and planned to buy a home in a better area but insisted on negotiating lower prices given the current landscape.

($1 = 7.0792 Chinese yuan renminbi)