Beijing recently introduced measures to prop up the housing market – which accounts for 15 percent of China's economy and impacts more than 40 industries – including lower mortgage rates and down-payments for some home buyers and cutting interest rates.
Last week, the People's Bank of China unexpectedly eased monetary policy. The central bank lowered its benchmark lending rates by 40 basis points to 5.6 percent and deposit rates by 25 basis points to 2.75 percent.
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Johnson Hu, analyst at CIMB believes the move is an inflection point for the housing market that could drive a sustained sales recovery.
"The PBoC's (People's Bank of China) rate cut is a strong catalyst for the China property sector as a) there is room for further cuts in mortgage rates, b) home buyers may see it as a signal of property market stabilization and thus boosting home sales and lowering housing inventory," he said.
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Historical patterns show that the first rate cuts in a cycle – September 2008 and June 2012 –helped drive a pickup in sales that lasted 1-1.5 years, according to CIMB. Home prices also started to rebound in 1-2 quarters after the first interest rate reduction.
Moody's is less optimistic recent easing will halt the decline in prices, however.
"High inventory levels will continue to pressure developers' working capital and profit margins, and weaken their pricing power," Moody's said, noting prices will continue to decrease as developers offer promotions and discounts to boost sales and liquidity.
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Average new home prices in China's 70 major cities fell 2.6 percent in October from a year earlier, the second consecutive month showing an annual fall, according to Reuters. Moody's declined to provide specific guidance on price declines.