China’s new home prices fell at the fastest pace in more than 9-1/2 years in May, official data showed on Monday, with the property sector struggling to find a bottom despite government efforts to rein in oversupply and support debt-laden developers.
Prices were down 0.7% in May from the previous month, marking the 11th straight month-on-month decline and steepest drop since October 2014, according to Reuters calculations based on National Bureau of Statistics (NBS) data.
In annual terms, new home prices were down 3.9% from a year earlier, compared with a 3.1% slide in April.
China’s indebted property sector, once a key engine of the country’s economic growth, has been hit by several crises since mid-2021, including developers defaulting on debt and stalling construction on pre-sold housing projects.
Authorities have stepped up measures to prop up the crisis-hit property sector including facilitating 300 billion yuan ($41.35 billion) to clear massive housing inventory, cutting down payments and easing mortgage rules.
But analysts believe these moves will do little to absorb the massive housing inventory, and the lifting of home purchase restrictions in major cities might further dampen buying sentiment in smaller cities.
New home prices fell last month in nearly all 70 of the cities surveyed by the NBS.
“The latest policies have boosted the second-hand home market in major cities, but the liquidity problem of real estate enterprises has not yet been eased and the confidence crisis in the new-home market has not yet been resolved,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Separately, official figures on Monday also showed property investment fell 10.1% in the first five months of the year from a year earlier, after dropping 9.8% in January-April. Home sales fell at faster pace in January-May.
China’s property market is set to diverge, said Nie Wen, an economist at Shanghai Hwabao Trust, with new home sales in large cities being driven by those who have been able to renovate and sell their existing homes, while real estate in small cities is expected to continue falling due to a housing oversupply and population outflows.
Policymakers are expected to support local governments and state-owned enterprises with discounted loans to buy unsold homes for low-cost housing and at the same time cut interest rates and fees to support homeowners improve their homes, Nie said.
