China's policymakers are likely to roll out more housing stimulus in the next 2 months as the swathe of support measures appears inadequate to stem the declines in home prices, TDS FX and Macro Strategist Alex Loo notes.

More housing stimulus in the next 2 months

“The housing downturn has weighed on consumer confidence and crimped real-estate investment, which is a headwind to GDP growth this year and next. Mortgage refinancing is a one-trick pony and will do little to revitalize demand. Instead, supply-side policies may work better.”

“We expect PBoC to raise the quota of its affordable home relending facility to CNY1tn (prior: CNY300bn) and to provide 100% of the loan amount (prior: 60%) next month. We also anticipate that local government will be permitted to use their special local bond proceeds to purchase unsold homes, as soon as this month.”

“The ‘bazooka move’ for the property sector would be the establishment of a property stabilization fund, but we don't envision this occurring with the central government being notably cautious in big policy moves over the past 3 years.”