Home prices across China suffered a 14th consecutive month of decline in July, a sign that authorities’ rescue package has done little to revive sentiment. Prices of new homes in 70 medium and large cities dropped 0.6% month-on-month in May, narrowing from the 0.7% drop a month earlier, according to the National Bureau of Statistics (NBS). Second-hand home prices also slid 0.8% compared with the previous month, a slower pace than June’s 0.9% drop and continuing a trend of slowing decline from May’s 1%. Once a growth engine powering a quarter of China’s GDP, the property sector has now become a drag on the economy since a nationwide campaign began in late 2020 to deleverage home builders and rein in debt. The country’s economy expanded by a slower-than-expected 4.7% in the second quarter, while weak consumption remains a burden, rising 2.7% year-on-year in July, below the 3.06% growth forecast by economists.
Authorities have recently issued measures to revive the property sector, including a CNY300 billion re-lending facility in May to help local governments buy unsold homes – essentially a bailout for beleaguered developers. Shenzhen became the first tier-one city to join this initiative. Among first-tier cities, where there is greater demand for housing, new home prices dropped 0.5% in Beijing, 0.8% in Guangzhou, and 0.9% in Shenzhen. Meanwhile, second-hand home prices fell by 0.9% in Guangzhou and 1.2% in Shenzhen, and remained unchanged in Beijing.
Shanghai was the only city to see month-on-month growth in both new and second-hand home prices, rising by 0.2% and 0.1%, respectively. “The month-on-month fluctuation in new home prices has shown marginal improvement, indicating that the government’s policy support is showing some effect, particularly in reducing home-buying costs and stimulating demand,” said Yan Yuejin, Director of the Shanghai-based E-house China Research and Development Institute. “Given that the year-on-year decline continues to widen, it is essential to further reinforce housing policies, with a particular focus on exploring home-buying demand.” For second-hand homes, Yan said that local governments should “leverage” the decline in prices as “an opportunity to highlight the benefits of ‘affordable housing,’ while actively encouraging various forms of social capital to invest in second-hand homes”.
In the meantime, the nation’s developers are still struggling. China’s top 100 developers reported home sales totaling CNY2.1 trillion in the first seven months of this year, a 37.5% decline compared with the same period last year, according to the China Real Estate Information Corp, as reported by the South China Morning Post.
