China's 'uneven' stimulus: Property revival measures boost sales in big cities, smaller towns struggle

China's bid to revive its struggling property market may have boosted sales in its biggest cities, but activity still needs to catch up in smaller towns struggling to pick up pace due to a long-term structural oversupply problem. This points to an uneven recovery trend.

China's stimulus measures include slashing minimum mortgage rates and down payments. Local governments were also instructed to buy unsold homes, along with dozens of other announcements. However, analysts suggest that more funds are needed to utilise inventories.

Reuters analysis shows that demand is catching up in Beijing and Shanghai but not in smaller regions. Still, house prices in May continued to slump, adding to concerns that the downturn may be here to last. This also means that China's revival measures need more reforms going forward.

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China Index Academy data confirms the concerning picture: 16 per cent year-on-year decline in home sales for a group of 30 cities. This means that incentives are not working that could stimulate long-term demand. This can further burden regional banks, who are most exposed to this sector. This also raises concerns over the country's economic revival, which is unable to achieve pre-COVID level growth.

Meanwhile, China's property investments declined 10.1 per cent in the first five months of 2024. New constructions also saw a 24.2 per cent decrease. Funds raised by property developers also fell 24.3 per cent in the initial months of 2024.

Goldman Sachs expects more easing measures in the future.