Prices of new homes in China fell at their fastest pace in more than 9-1/2 years in May, official data showed on Monday, as the property sector struggled to find a bottom despite government efforts to curb oversupply and support debt-laden developers. According to calculations based on data from the National Bureau of Statistics (NBS), prices fell by 0.7% month-on-month in May. This was the 11th consecutive month-on-month decline and the largest decline since October 2014. On an annual basis, new house prices fell 3.9% on the year, compared with a 3.1% decline in April.
China’s debt-laden real estate industry, once a key engine of China’s economic growth, has been hit by multiple crises since mid-2021, including debt defaults by developers and stalled construction of pre-sale housing projects. Authorities have stepped up support for the crisis-hit real estate sector, including providing 300 billion yuan ($41.35 billion) in funding to clear massive housing inventories, reducing payments and easing mortgage rules. However, analysts believe that these measures will have little effect on digesting the large housing inventory, and the lifting of purchase restrictions in large cities may further suppress purchasing sentiment in small and medium-sized cities. Last month, new house prices fell in almost all of the 70 cities surveyed by the Office for National Statistics.
Separately, official data on Monday also showed that real estate investment fell by 10.1% annually in the first five months of this year, following a 9.8% decline from January to April. Home sales fell faster from January to May. Nie Wen, an economist at Shanghai Huabao Trust, said China’s real estate market will diverge, with new home sales in big cities driven by those who have the ability to renovate and sell existing homes, while real estate in smaller cities is expected to diverge. continued decline due to overpopulation and outmigration. Policymakers are expected to support local governments and state-owned enterprises in purchasing unsold low-rent housing through subsidized loans, while lowering interest rates and fees to support property owners in improving their homes, Nie said.
