BEIJING (Reuters) - Woes in China's residential property market are expected to deepen this year as homebuyers remain cautious, with economists now expecting home prices to fall in 2022 and betting on a faster drop in property sales than previously forecast.
New home prices are expected to fall 1.4% in 2022, according to a Reuters survey of more than 10 analysts and economists polled between Aug. 29 and Sept. 2. In the May quarterly survey, analysts had expected prices to remain unchanged for the year.
Property sales were seen slumping 24.5% in 2022, a far bigger drop than the 10% fall forecast in the May poll.
The property sector, which accounts for about a quarter of China's economy, has lurched from crisis to crisis since the summer of 2020 after regulators stepped in to cut excess leverage, causing some developers to default on their debts and struggle to complete projects, resulting in homebuyers threatening to stop making payments.
The struggling sector is weighing on the outlook for the world's second-biggest economy, which narrowly escaped a contraction in the second quarter due to widespread COVID-19 lockdowns.
"Uncertainty over China's growth prospects and concerns about project incompletion will largely drive weak homebuyer demand over the next 6-12 months," said Daniel Zhou, an analyst at Moody's in a research note.
"COVID-19 disruptions to business activity and sales execution will also dampen consumer sentiment, while buyers' expectation of weaker property prices will delay property purchases."
While authorities have taken a series of measures to prop up the sector this year, analysts in the Reuters poll said more was needed.
More than 200 cities have introduced measures to help the property sector, such as providing cash subsidies and allowing smaller down payments for house purchases. China's central bank also cut benchmark lending rates on Aug. 22 to reduce costs for homebuyers.
"Multiple easing policy measures are needed to stabilise the property sector, such as relaxing curbs on purchase, re-selling and lending in second-tier cities," said Huang Yu, an analyst at real estate research firm China Index Academy.
"China must also step up financing for some developers and ensure housing projects which have not yet been finished are delivered to buyers."
Next year, economists expected home prices to improve but sales to remain downbeat.
New home prices were seen rising 2.0% year-on-year in the first half of 2023, but sales were expected to fall 15% due to ongoing sluggish demand, according to the Reuters poll.
"The pace of recovery of the real estate market is still dependent on the pace of macroeconomic condition, Covid-19 control restrictions and the strength of policy support," Yu added.
(For other stories from the Reuters quarterly housing market polls:)
(Reporting by Liangping Gao, Shuyan Wang and Ryan Woo; Editing by Ana Nicolaci da Costa)