Despite revival efforts, Chinese home prices are falling at a faster pace
China’s new-home prices declined faster in February, deteriorating for the first time in six months despite the country’s most recent attempts to support the industry. Prices in 70 cities, excluding state-subsidized housing, fell 0.14% from January’s 0.07%, according to National Bureau of Statistics data released Monday. Used property prices declined 0.34%, matching the rate a month ago. Even while sales improve, continued price decreases may dampen optimism that the real estate market has bottomed out. Policymakers are scrambling to limit the decline as deflationary pressure and a trade war exacerbate the economic gloom.
“Markets should not forget that China’s property collapse is not yet over,” Nomura Holdings Inc.’s senior China economist, Lu Ting, said in a March 10 study. “From the high-frequency data, the property sector appears to be losing momentum.” In a worrying indication, used-home prices in top-tier cities fell 0.1% in January, marking the first dip since the government implemented a large stimulus package in September. Such prices are frequently seen as a bellwether since local governments less influence them, and sales of secondhand homes have eclipsed those in the primary market. According to other statistics released Monday, residential sales fell 0.4% in the first two months from a year ago, improving on a 17.5% decrease last year. Meanwhile, retail sales and industrial production increased faster than experts expected.
“China’s recovery may prove short-lived due to the economy’s underlying structural challenges,” Zichun Huang, China economist for Capital Economics, said in a note on Monday. “In particular, after a few months of recovery, home sales started to fall again at the start of the year.” Year-on-year price decreases have lessened marginally. The statistics agency said that new-home prices declined 5.22% in February, compared to 5.43% in January. Existing-home values fell 7.53%, compared to 7.8% in January. On Sunday, China’s fresh directives to boost consumer spending reiterated initiatives to “better cater for property consumption demand.”
“Reiterating these measures at recent key policymakers’ meetings will result in faster policy implementation,” said Raymond Cheng, head of China property research at CGS International Securities Hong Kong. “That will restore homebuyers’ confidence and help boost property sales eventually.” At a national parliament gathering this month, China’s leaders outlined new measures to support the housing market and an optimistic economic growth target amid rising trade tensions with the United States under President Donald Trump.
The conference “set a positive policy tone, with greater autonomy of destocking being a key highlight,” UOB Kay Hian analysts Jieqi Liu and Damon Shen said in a March 12 note. “We expect the market to further stabilize in March.” To boost property sales, China’s southern tech metropolis of Shenzhen loosened its policy on housing provident fund loans, which are based on a compulsory savings program. At the parliament meeting, Beijing also aimed to “effectively prevent debt defaults” by real estate enterprises, indicating a further turn toward assisting more sector participants. Previously, it had targeted “quality top developers” for assistance.
