The turmoil roiling China's stock market is unlikely to spread to the country's luxury housing sector, and, in the longer term, could help draw investors back to more stable property investments, analysts say. The benchmark Shanghai stock index has fallen more than 30% in value since mid-June, wiping trillions of dollars off the market, a dramatic turnaround after a lengthy bull run, prompting the government to launch a series of rescue measures while economists warned of further uncertainty. Analysts believe the current level of volatility will do little damage to the real estate market in the world's second-biggest economy, which has shown signs of a recovery since Beijing eased mortgage restrictions and cut interest rates earlier this year to stimulate the sector. More: Hong Kong Luxury Sales: Relentless Joe Zhou, Jones Lang LaSalle head of research for Eastern China, said the rebound in home sales had been partially attributed to the stock market rally, but it was mainly led by government stimulus measures, which helped release pent-up demand from those seeking to upgrade their properties. “For this reason, the stock market turmoil will have very limited immediate impact on the housing market,” Zhou told Mansion Global, adding that, unless the instability escalates dramatically, there would likely be no impact. “Over the medium and long term, the current stock market turmoil may lead investors to recognize the volatility and risks of the stock market. In such a case, some may sell stocks and start to invest their capital in the housing market, which is a much more stable asset class,” he added. Market strategist Bernard Aw at trading firm IG Group in Singapore echoed the remarks, saying investors who had entered the Chinese stock market early this year or last year are likely to still be sitting on gains, despite the plunge in share prices. “For the time being, there are few signs of contagion impact on luxury properties even if the stock decline continues for a while longer,” Aw said.
New home prices across 70 cities in China rebounded in May for the first time in 13 months, gaining 0.2% month-on-month, suggesting a stabilization in the home market despite the domestic economy’s growth slipping to a six-year low of 7% in the first quarter. Although property investors might face liquidity issues in the short-term, Regina Yang, head of research for consultancy Knight Frank’s Shanghai outpost, believes that the current insecurity in the stock market could make real estate a more attractive option. “After all, there are not a lot of investment choices in China and property remains a preferred option by investors traditionally,” she said, noting that luxury home sales in Shanghai jumped 230% in the second quarter in figures compiled by Knight Frank and which are due to be released this week. More: Miami Condos Seek Chinese Buyers The Shanghai Composite Index closed up 2.4% on Monday, the third straight day rally after the government launched a rescue plan to prevent a market crash. However it still was 23% below its June 12 peak. These measures include a crackdown on short-selling and banning big shareholders and their executives from selling stock for the next six months.