U.S. investment bank Goldman Sachs forecasted that amid the full-scale downturn in China's real estate market, the country will experience an L-shaped recession over the next few years, posing a significant obstacle to the recovery of the world's second-largest economy.
The Goldman Sachs analyst team led by Chinese economist Wang Lisheng stated in an investor note on the 11th (local time) that "due to demographic demand decline, shifts in government stimulus policy focus, and weakened home-buying capacity, China's real estate market will undergo a prolonged downturn."
After a brief recovery following the lifting of the 'zero-COVID' policy, China's real estate market is losing momentum again. The monthly growth rate of new home sales in China has declined year-on-year for 19 consecutive months from July 2021, when liquidity crises at major Chinese real estate developers such as Evergrande began in earnest, through January of this year. Then, starting in February, when the effects of lifting quarantine measures began to appear, the rate turned positive, increasing to 29.3% in March and 31.6% in April, but fell again to 6.7% in May, just three months later.
Goldman Sachs pointed out that regulatory easing measures such as loosening loan controls for real estate buyers and developers and further lowering mortgage rates will be necessary to boost new home sales.
Regarding this, Bloomberg reported, "China's real estate industry has avoided collapse but remains a major risk factor for financial sector instability," adding, "After about 19 months of historic downturn, new home sales and prices briefly rebounded but signs of weakness have become clear since."
Bloomberg Economics analyzed that real estate developers, which account for about 12% of China's gross domestic product (GDP), are at risk of default.
International organizations also hold somewhat pessimistic views on China's real estate market outlook. Earlier, in the World Bank's global economic outlook report released on the 6th, ongoing pressures in the real estate sector were cited as downside risks to China's economy, leading to a downward revision of China's growth forecast for next year from 5.0% announced in January to 4.6%.
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