The worst may be over for China’s housing market, says Jing Ulrich, chairman, China equities at JPMorgan.

She says a series of supportive government measures, combined with aggressive interest rate cuts and accelerated price reductions, have begun to lure Chinese homebuyers from the sidelines.

“Compared to several months ago, government decision-makers appear to have formed a consensus in favour of boosting housing sales, recognising that the health of the property sector is vital to consumption and the broader economy,” she says.

Ms Ulrich points out that commercial banks have now begun implementing preferential mortgage rates, thereby reducing monthly payments for qualified homebuyers. She adds that while policymakers are committed to ensuring an adequate supply of affordable housing, plans to build low-cost housing have been scaled back, with some local governments instead opting to purchase completed units built by private developers.

“This should help to lower the inventory of unsold housing and alleviate concerns of competition between public and privately-developed housing,” she says.

“Although a recovery may be underway in the mass-housing market, prices may have further downside in the luxury segment.

“China’s housing prices must evolve to reflect what average citizens are able to afford – this means that a return to abnormally high margins for property developers is unlikely.”

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