Tabula Investment Management Limited says renewed focus on China’s property market, including important policy reform, should see a recovery in the sector.
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Michael John Lytle CEO of Tabula Investment Management
There are already signs that confidence in the housing market – which is the world’s largest and represents by some estimates 25% of Chinese GDP – is responding to government intervention intended to stimulate both supply and demand.
In the last couple of years, the Chinese government has taken steps to limit speculative home purchases and restrict the liabilities of its property developers. These moves, combined with the impact of COVID, led to a domestic property crisis. But Tabula says policymakers are now responding on two fronts. In terms of demand, more credit is being extended for mortgages, and mortgage rates are no longer tied to policy rates, meaning that they can now decline without the central bank reducing its official rates. On the supply side, local governments have stepped in to help developers finish previously stalled projects.
Tabula also highlights that demand for housing remains robust. Over 130 million people are expected to move from the countryside into cities this decade (based on UN estimates), while marriages, a key driver of demand for new homes, are projected to settle at more than 6 million annually (based on ceicdata.com).
Tabula Investment Management CEO Michael John Lytle says: “Policymakers recognise that this is a vital sector of the economy and have already taken measures to restore financial stability and confidence. Recovery is in everyone’s interest: frustrated property owners, bond holders, property companies and the government.”
Lytle continues: “Once the obstacle of the COVID virus has been removed, there is likely to be pent up demand for housing in China, reflecting limited output in recent years, postponement of marriages and consumers building up cash savings. And after recent deleveraging among developers, when the rebound comes, the sector will be on a much better financial footing.”
Since launch in September 2021, Tabula Investment Management has seen over US$315 million of net inflows into its Asia ex-Japan High Yield Corporate USD Bond ESG UCITS ETF (TAHY) from investors who see value in the Chinese real estate sector and more broadly in Asian high yield bonds.
Source : ETFWorld.co.uk
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