Liang Ping Gao and Ryan Wu
BEIJING (Reuters) – New home prices in China fell to their steepest drop in nine years in June, while property sales and investment also slumped, increasing pressure on policymakers to deliver more stimulus to shore up a battered housing sector that has failed to find a bottom.
New home prices fell 4.5 percent from a year earlier, the lowest since June 2015, according to Reuters calculations based on data from the National Bureau of Statistics (NBS), down from a 3.9 percent drop in May.
Prices fell 0.7% month-on-month in May, and continued to fall 0.7% in June.
A sharp decline in the real estate market since 2021 has led to a succession of developers defaulting on loans and leaving many construction sites idle, undermining confidence in the real estate sector, which has traditionally been favored by Chinese households as a safe haven for their savings.
The real estate sector, which accounted for a quarter of GDP at its peak, remains a major drag on the $18 trillion economy.
Authorities have rolled out a series of support measures, including lowering the cost of buying a home in major cities and allowing local governments to buy up some unsold apartments and turn them into affordable housing.
“The recent relief is a step in the right direction, but it is still small compared to the scale of the problem. The real estate industry is deeply rooted, and when the industry suffers, it hurts the entire economy,” Harry Murphy-Cruz, economist at Moody’s Analytics, said in a research note.
China’s economic growth grew 4.7% in the April-June quarter, official data showed, the slowest rate since the first quarter of 2023 and below the 5.1% forecast by analysts in a Reuters poll.
Some measures, such as the lifting of restrictions on home buying, have helped market sentiment, but further stimulus may not support a price slide.
“The supply and demand structure in the real estate sector has fundamentally reversed. (The market) doesn’t need to have overly high expectations about the effectiveness of the policy,” said Zhang Dawei, an analyst at Zhongyuan Real Estate.
“Prices are unlikely to rise across the sector going forward,” Zhang said.
Separate data from the Office for National Statistics showed property investment fell 10.1% year-on-year in the first half of 2024, while home sales on a floor area basis fell 19.0% after a 20.3% drop in the first five months of the year.
Markets will be closely scrutinising instructions from the Communist Party leadership meeting starting on Monday, where key economic issues will be discussed.
Policy advisers believe China could announce tax and fiscal reforms that would boost revenues for debt-strapped local governments and ease pressures on their finances.
“The remainder of 2024 will depend on authorities’ success in stemming the property market decline and stimulating domestic consumption, both of which require significant intervention,” said Murphy Cruz of Moody’s Analytics.
(Reporting by Liangping Gao, Ella Kao and Ryan Wu; Editing by Jacqueline Wong)
