China Real Estate: Politburo Meeting Reiterates Support, but More Needed To Address Inventory

The Hong Kong market experienced a solid rally following the July 24 Politburo meeting, with the real estate stocks rebounding from recent losses. We believe signs of government support are positive but we would have liked to see more in addressing excess property inventory. We believe more details will emerge along with ongoing policy adjustments, but for the time being, our view remains that China’s real estate activity will recover gradually through 2025. As a result, we think risks remain in the sector with negative news likely to continue regarding possible defaults. There was no explicit language in the messages regarding financial support for the real estate developers. As such, we continue to prefer buying China Overseas Land & Investment 00688 over others given financial strength and an attractive project pipeline in Tier 1 and Tier 2 cities.

The meeting mainly guided for mitigating sector financial risks, adjusting citywide homebuying requirements and ramping up affordable housing supply. Among the measures that we expect from the local governments include addressing excess housing inventories through encouraging sales of existing houses and converting unsold units to leasing apartments. Also, we think ongoing credit support for project completion, coupled with more relaxation on purchase restrictions and down payment ratio, should bode well for further recovery in housing supply and demand.