HSBC, whose relatively bullish view on China’s residential property sector ranks as one of the bravest calls in markets, said in February that 2025 would mark an inflection point for the ailing industry. “We’ve long anticipated government intervention, pent-up demand and a necessary market correction to drive a gradual recovery in property sales – and we’re seeing signs of all of that playing out now,” HSBC said at the time.
These green shoots, however, were confined to first-tier cities and had more to do with shallower declines in the prices of new and second-hand properties than with outright increases in home values. Moreover, signs of a reacceleration in the pace of contraction were already apparent at the end of the first quarter of this year.
In a report on November 13, HSBC said “some cracks are starting to surface after a recovery”, while “the pace of destocking is falling short of our expectations, primarily due to weakening sales momentum”. The reality is that there was never a recovery in the first place. Even a stabilisation of China’s housing market has proved elusive. This partly explains why state-backed China Vanke – one of the last big developers to have so far averted a default – is teetering on the brink of financial collapse.
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On November 26, Vanke proposed delaying repayment on a yuan-denominated bond for the first time, causing the prices of some of its dollar-denominated bonds to fall into distressed territory and heightening concerns over Beijing’s willingness to support even the largest vulnerable developers.
Following Vanke’s announcement, S&P Global Ratings said the risk of a “distressed restructuring” in the next six months had risen and that Vanke’s debts – which include a bond maturity wall of 11.4 billion yuan (US$1.6 billion) between December and May 2026 – were “unsustainable due to its weak liquidity”. Two years ago, the prospect of Vanke defaulting would have caused turmoil in China’s markets. Now, the MSCI China Index, which tracks Chinese companies listed at home and abroad, rose 2.8 per cent last week.
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The negligible spillover effects show the extent to which the policy and market landscape in China has changed since the eruption of the housing crisis in 2021. First, Beijing has loosened policy towards the sector significantly since 2023, announcing several rounds of measures to stimulate demand. Further easing, including interest rate subsidies and income tax rebates for mortgage borrowers, is likely to be in the works.