China's property crisis worsens

China's property market Chinese

China’s home prices slid at a faster pace in August, marking a 12th month of declines, underscoring how a revival of the country’s real estate market could take much longer despite a flurry of government support policies, Bloomberg reported.

New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.29% last month from July, when they fell 0.11%, National Bureau of Statistics figures showed. From a year earlier, prices dropped 2.1%, the most in seven years.

China’s $2.4 trillion new-home market is showing little signs of recovery, adding to the drag on growth in the world’s second-largest economy. Other figures released Friday showed residential sales tumbled about 30% in the first eight months of the year and property investment shrank more than 7%.

Local governments have stepped up stimulus in recent weeks to issue at least 70 property easing measures. That’s after President Xi Jinping’s Politburo called for efforts to defuse the property crisis. While the central government has avoided outright stimulus, it’s been giving tacit approval to local authorities to unwind austerity steps and shore up demand.

Downward pressure on home prices was seen across the nation last month. The trend was worst in third-tier cities, where declines accelerated to 0.42% from 0.24% in July. In second-tier cities, prices fell 0.21% after slipping just 0.01% a month earlier. First-tier cities saw a 0.1% increase, the slowest pace in eight months.

The secondary market also saw a deterioration. Prices of existing homes fell 0.35% in August, faster than the previous month’s 0.21% drop, the bureau said.

The declines are weighing on sentiment along with a mortgage boycott by homebuyers who are waiting for cash-strapped developers to complete delayed projects. Rising unemployment and China’s strict Covid restrictions are also denting economic activity.

Housing Slump

Prices and sales in China's property market are both falling

Source: China's National Bureau of Statistics, Bloomberg Intelligence

China Evergrande Group, one of the nation’s most distressed developers, this week pledged to resume its remaining stalled projects by the end of the month.

“A lot more supportive measures are needed to really make buyers confident on the home market again,” Chen Wenjing, associate research director at China Index Holdings, said before the figures were released.

A Bloomberg gauge of Chinese developer shares fell as much as 1.6% on Friday, after jumping 2.9% a day earlier. Recent gains in such stocks may not last, JPMorgan Chase & Co. analysts including Karl Chan said.

In another potential drag on home values, the southern Chinese metropolis of Guangzhou plans to loosen price controls as property sales keep falling. The local government may allow prices to move as much as 20% lower than average or as much as 10% higher, compared with maximum swing of 6% both ways currently, China Business News reported.