Why China’s new stimulus bazooka isn’t enough to fix the nation’s housing crisis

China’s all-out stimulus package will fail to meaningfully reverse ongoing chaos in the nation’s property market, JPMorgan said in new research.

Though Beijing committed on Tuesday to reduce mortgage rates and downpayment rules, the bank said these efforts will not bolster housing consumption as hoped.

“These measures are unlikely a game changer,” strategists led by chief China economist Haibin Zhu wrote. “Hence we maintain a cautious view on near-term housing market outlook.”

For years, high debt and low demand have stalked China’s housing sector, and both issues have proven near-impossible to shake. These conditions have led to massive developer defaults, and even notched comparisons to the 2008 financial crisis.

Since Chinese real-estate accounts for as much as 30% of the country’s GDP, this issue implies broader macroeconomic concerns.

China’s economy has been struggling overall, and the country’s ability to hit its year-end growth target has since turned uncertain. Though Tuesday’s broad-sweeping stimulus announcement is meant to be Beijing’s antidote, some analysts remain skeptical about what it will achieve.

According to JPMorgan, the measures focused on housing might have unintended consequences.

For instance, China will seek to match existing mortgage rates to new ones, reducing rates by an average of about 50 basis points. But though this move is estimated to save mortgage payers about 150 billion yuan, JPMorgan expects these savings to be pocketed rather than spent.

Lowering the minimum downpayment ratio for second homes from 25% to 15% won’t change much, either.

“Home sales came in weaker than expected in September, and conventional demand-side easing measures (relaxation in mortgage policy and home purchase restrictions) cannot address the problems of weak income expectations, weak house price expectations and concerns about home delivery,” analysts wrote.

Meanwhile, previous efforts to incentivize banks and state-owned enterprises to snap up surplus housing inventory have had mixed results. Though Beijing has created a 300 billion yuan lending facility to buy unsold homes, only 12.1 billion had been used by the second quarter.

Other analysts appear to agree that more needs to happen.

“We have seen plenty of property support measures this year, but they have thus far been insufficient to establish a trough,” Lynn Song, ING’s Greater China chief economist, said. “The PBOC’s new measures will help but we will likely need to see additional city level measures ramped up as well.”

In his view, the property market will remain a drag on growth until prices stabilize and excess housing supply is reduced.

Aside from housing, China’s broader stimulus package struck JPMorgan as a positive surprise. The country has also pledged a major liquidity boost, and will seek to reduce interest rates and reserve requirement ratios.