Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

China's home prices dip for 4th month, may weaken further

Published 11/15/2023, 09:32 PM
Updated 11/16/2023, 01:20 AM
© Reuters.  A worker walks past a construction site near residential buildings in Beijing, China April 14, 2022. Picture taken April 14, 2022. REUTERS/Tingshu Wang/File Photo

By Liangping Gao and Ryan Woo

BEIJING (Reuters) -China's new home prices fell for the fourth straight month with dozens of cities hit by declines, the most since the peak of the COVID-19 pandemic last year, suggesting a broader weakening in the sector that could drag on the country's overall recovery.

New home prices in October dropped 0.3% month-on-month after a 0.2% dip in September, according to Reuters calculations based on National Bureau of Statistics (NBS) data.

Once a key engine of economic growth accounting for around a quarter of China's economic activity, a regulatory crackdown since 2020 to curb debt has tightened liquidity and raised default risks for developers, delaying many projects.

Authorities have rolled out a flurry of measures to prop up the pivotal sector, including relaxing curbs on home purchases and cutting borrowing costs but homebuyers remain cautious.

"The most important reason for the bearish home prices is that demand is weak, buyers don't know if pre-sold homes they buy will be delivered on the dates promised by the developers," said Ma Hong, senior analyst at Zhixin Investment Research Institute.

Nomura estimated there are around 20 million pre-sold units that are either not yet constructed or delayed. That is equivalent to 20 times the number of unfinished projects by indebted developer Country Garden as of end-2022.

Bearish home prices follow data on Wednesday showing some improvement in industrial output and retail sales, which both beat expectations in October, but overall investment growth was tepid and property sales and investment slumped sharply.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"Residents remain uncertain about income growth, and there are poor returns on financial investments in the country. They are hesitant to buy a big-ticket item like a house," Ma added.

Out of 70 cities, 56 reported declines in monthly prices last month, marking the most cities number since October 2020, up from 54 in September.

TWIST AND TURNS

House prices in three major cities Beijing, Shenzhen and Guangzhou all fell month-on-month in October.

Compared with a year earlier, nationwide prices were down 0.1%, matching a decline in September, August and July.

For existing home, NBS data showed 67 cities posted month-on-month price declines in October, up from 65 in September.

The property market is still in adjustment and transformation, and there will be "twists and turns" in the economic recovery, Liu Aihua, spokesperson for the National Bureau of Statistics, said on Wednesday.

Despite the lifting of strict COVID measures late last year and a slew of support measures, the world's second-biggest economy has struggled to get back on solid footing, largely due to weak consumer confidence and the deepening property crisis.

"House prices are expected to continue to fall in the traditionally low season of November and December," said Zhang Dawei, analyst at property agency Centaline.

Zhang said property policies, especially in the first-tier cities, need to be stepped up.

China's central bank plans to provide at least $137 billion of low cost financing to the country's urban village renovation and affordable housing programmes.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.