China's new home prices plunge amid deepening property sector woes

China’s Home Prices: China's new home prices have plummeted at the fastest rate in over 9-1/2 years, highlighting ongoing struggles in the property sector despite government interventions aimed at stabilising the market.

In May, home prices dropped by 0.7 per cent compared to the previous month, marking the 11th consecutive monthly decline and the sharpest since October 2014, according to Reuters calculations based on National Bureau of Statistics (NBS) data. On an annual basis, prices were down 3.9% from a year earlier, compared to a 3.1% decline in April.

The Chinese property market, once a cornerstone of economic growth, has been severely impacted by developer defaults and stalled construction projects since mid-2021. Government measures, including a 300 billion yuan ($41.35 billion) initiative to reduce housing inventory and easing mortgage rules, have failed to alleviate the sector's challenges.

Analysts warn that these efforts may not be sufficient to absorb the oversupply of homes, with the relaxation of home purchase restrictions in major cities potentially dampening demand in smaller urban centres.

"The latest policies have boosted the second-hand home market in major cities, but liquidity issues among real estate enterprises persist, and confidence in the new-home market remains low," said Xu Tianchen, senior economist at the Economist Intelligence Unit.

Official data also revealed a 10.1 per cent year-on-year decline in property investment in the first five months of the year, following a 9.8 per cent drop in the January-April period. Home sales have similarly declined at an accelerated pace from January to May.

Economists like Nie Wen from Shanghai Hwabao Trust anticipate a divergence in China's property market, with major cities seeing some stability driven by homeowners upgrading their residences, while smaller cities continue to struggle with surplus housing and population outflows.

Looking ahead, policymakers are expected to bolster support for local governments and state-owned enterprises through discounted loans aimed at purchasing unsold homes for low-cost housing. Additionally, reductions in interest rates and fees are being considered to assist homeowners in enhancing their properties amidst the economic uncertainty.

The trajectory of China's property market remains uncertain, with stakeholders closely monitoring government actions and market responses amid ongoing challenges and regulatory adjustments.

With Reuters Inputs