The crisis plaguing China’s once-booming housing sector shows no signs of abating, with the latest government data showing home prices fell even sharper in May than the previous month.
According to data from the National Bureau of Statistics of China reported by Bloomberg and released on Monday, new home prices (excluding state-owned housing) in 70 Chinese cities fell 0.71% in May from April, the biggest drop since October 2014, when prices and sales cooled and China’s housing market faced a dramatic downturn.
About a decade ago, the housing sector, historically a major driver of Chinese investment and the backbone of the country’s economy, threatened China’s growth after decades of explosive growth. Now, the real estate crisis that began in 2020 is weighing on China’s difficult recovery from the COVID-19 pandemic and threatening to destabilize domestic and global markets.
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China’s housing market is estimated to account for 30% of the country’s economic activity.
Existing home prices also fell 1% in May, the latest data shows, the biggest drop since China began using its current data-gathering methods in 2011. Year-over-year, new home prices fell 4.3%, while existing home prices fell an even deeper 7.5%.
These figures seem to suggest that Beijing’s recent moves to bail out its struggling real estate sector have yet to make a big difference and shift things in a more positive direction.
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China’s leaders last month sought to tackle the current downturn with a comprehensive rescue package that includes easing mortgage rules and asking local governments across the country to buy unsold homes from struggling property developers and turn them into affordable public housing.
The People’s Bank of China said it would provide 300 billion yuan (equivalent to $41.5 billion) in loans through a nationwide program to help local governments undertake such potentially expensive projects.
But the recovery has been slow and a glut in the domestic market continues to push down prices, with reports saying authorities in Beijing earlier this month they could move to reduce inventories if rescue measures don’t work.
Bloomberg reported that China’s State Council has urged officials to be “open-minded” as they craft new policies to reduce supply and stabilize the market. The cabinet should “keep an open mind and think broadly, and steadily and concretely advance the consolidation and revitalization of existing housing and land,” it said.
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Newsweek is committed to challenging conventional wisdom, seeking common ground and finding connections.
