China | Real estate sector needs a soft-landing

Summary

We analyze the ongoing real estate sector crackdown measures and the reasons behind. We investigate the impact of housing price deceleration on banking, government, enterprises and the household sector and conclude that real estate sector needs a soft-landing in 2022.

Key points

• Key points:
• In the aftermath of COVID-19 pandemic, China’s authorities didn’t use the real estate sector to boost the economy but more tightening regulatory measures were unveiled.
• Reasons behind include "common prosperity" target, "three-child" policy and the escalating financial risks related to the real estate sector.
• Real estate regulatory storm led to a deceleration of housing prices and investment.
• We quantify the impact of housing price slowdown on growth by analyzing the housing market's exposure to four sectors: banking, household, enterprises and government.
• We conclude that given the housing market contributes 1/4 of growth, the authorities will marginally ease the ongoing tightening measures, but this does not mean it will go back to the real estate driven business cycle.

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