Chinese property sector may have hit the bottom, S&P says.

The Chinese property sector may have finally found its bottom, S&P Global Ratings said, as the agency believes surging secondary sales will help the market stabilize toward the second half of this year.

The real estate sector will generate about 17 trillion yuan (HK$18.2 trillion) in sales this year, as it did last year, but the secondary segment will be a bigger component of the total sales, the rating agency said in a report.

The primary market will likely generate between 8 trillion yuan and 8.5 trillion yuan of sales in 2025, compared with about 9.7 trillion yuan last year, the report said.

Developers don't directly reap benefits from secondary sales, and strong second-hand home demand could cannibalize primary sales, reducing developers' cash flow and capacity for debt repayments, but as homeowners sell residences in the secondary market, they may reinvest proceeds into more premium first-hand homes, it said. 

S&P believes richer, upper-tier cities will turn around first, eventually boosting the confidence and demand of consumers in more peripheral regions. 

However, the agency also warned if the effects of the supportive policies rolled out last September weaken without any follow-up measures, the recovery may falter.

A sudden default by a surviving Chinese developer this year may also hit sentiment before any rebound truly takes hold, the report said. 

Aiden He