China’s new house prices slump to new 9-year low

China’s new home prices continued their downward trend in July, falling at the fastest pace in nine years. This decline comes despite a series of support measures implemented by the government to stabilise the struggling property sector.

The prolonged housing market slump has raised concerns about its impact on the world’s second-largest economy.  Analysts now believe that Beijing’s five per cent GDP growth target for 2024 may be difficult to achieve, even as other economic indicators have shown some stability.

New home prices dropped by 4.9 per cent year-on-year in July, marking the sharpest decline since June 2015 and exceeding the 4.5 per cent decrease seen in June (the earlier reported 5.0 per cent decrease was due to rounding).

“It is increasingly looking like the property market will continue to need more policy support to establish a bottom,” analysts at ING said in a note.

Beijing has increased support for the real estate sector, which once made up a quarter of the economy, by lowering mortgage rates and reducing home buying expenses.

While policies have helped boost the market, external economic challenges have limited their impact, according to Song Hongwei research director at Tongce Research Institute, a real estate research firm.

The downward trend is further reinforced by the fact that new home prices have fallen for 13 consecutive months in monthly terms.

Among 70 cities surveyed, only Shanghai and Xian saw monthly price increases for new homes, with Shanghai being the only city to experience a price rise in the resale market as well.

Faced with a surplus of unsold homes across the country, some property developers are resorting to unconventional promotional offers to attract buyers.

China Merchants Shekou Industrial Zone Holdings’ Nanjing branch, for example, is offering apartment buyers a package worth 200,000 yuan ($27,950) that includes flight time towards a pilot’s license and a partial ownership stake in a jet.

In late July, China’s top decision-making body, the Politburo, reiterated its commitment to support the completion of unfinished projects and convert unsold apartments into affordable housing.  Separate data showed that property sales by floor area in January-July dropped by 18.6 per cent year-on-year, compared to a 19.0 per cent slump in the January-June period.

Consumer confidence regarding the housing market has also hit a record low, with a recent central bank survey indicating that 23.2 per cent of residents expect house prices to fall in the third quarter.

Attribution: Reuters

 

Subediting: M. S. Salama