China’s new home prices extend declines despite policy support

In Global Shorts
26 2 月, 2024

 China’s new home prices slowed their month-on-month declines in January with the biggest cities seeing some stabilisation, but the nationwide downward trend persisted despite Beijing’s efforts to revive demand.

New home prices fell 0.3% month-on-month in January after dipping 0.4% in December, according to  calculations based on National Bureau of Statistics (NBS) data on Friday.

China has been ramping up measures to arrest a property downturn, including ordering state banks to boost lending to residential projects under a “whitelist” mechanism. More big cities including Shanghai have also eased purchase curbs to lure homebuyers.

Last month, home prices in tier-one cities fell 0.3% on month, smaller than their 0.4% decline in December, partly due to additional support measures including a reduction in down-payments.

Among 70 cities surveyed by NBS, Shanghai saw the biggest month-on-month increase with a rise of 0.4%, while the remaining three tier-one cities – Beijing, Guangzhou and Shenzhen – posted smaller home prices declines than most tier-two and tier-three centres.

The number of cities that saw monthly price falls in January also decreased, but the overall market remained on a clear downtrend with buyer sentiment still very weak.

From a year earlier, home prices fell 0.7%, marking the sharpest drop in 10 months. That was despite a low statistical base in January 2023 when prices dropped 1.5% year-on-year due to COVID-19 disruptions.

Nie Wen, an economist at Hwabao Trust, said home price declines could persist.

“It may take more than a year for the entire property market to fully recover and rebound,” Nie said.

Central bank data released on Feb. 9 showed household loans, mostly mortgages, climbed to 980.1 billion yuan in January, far more than 222.1 billion yuan in December.

However, Nie said people are not using such loans to buy homes, but rather for personal consumption.

Residents will invest in the medium to long term, including buying property, only when their income expectations improve, he added.

The property market has struggled to stabilise having languished since 2021 due to a series of defaults among overleveraged developers.

As a result, policymakers have continued to roll out measures to boost market confidence.

The country’s central bank on Tuesday announced its biggest ever reduction in the benchmark mortgage rate, although analysts believe its impact on home price will be limited given existing mortgage holders will not benefit until next year.

“It will take some time for homebuyers’ incomes and confidence, and overall demand to recover in the property sector, which is still in the process of gradually bottoming out,” said Zhang Dawei, an analyst at property agency Centaline.