China’s new home prices fall at fastest pace in 9 years in August

By Liangping Gao and Kevin Yao

BEIJING (Reuters) – China’s new home prices fell at their fastest pace in more than nine years in August, official data showed on Saturday, as support measures failed to spur a significant recovery in the property sector.

New home prices fell 5.3 percent from a year earlier, the fastest pace since May 2015, compared with a 4.9 percent drop in July, according to Reuters calculations based on data from the National Bureau of Statistics (NBS).

In monthly terms, new home prices fell for the fourteenth consecutive month, down 0.7%, equal to a decline in July.

The housing market continues to grapple with deep-indebted developers, unfinished apartments and falling buyer confidence, straining the financial system and jeopardizing the 5% economic growth target for the year.

A Reuters poll predicted China’s house prices would fall 8.5 percent in 2024 and fall 3.9 percent in 2025 as the sector struggles to stabilize.

China’s real estate market is still in the process of being phased out as demand, income and homebuyer confidence will take some time to recover, said Zhang Dawei, chief analyst at real estate agency Centaline.

“The market is looking forward to stronger policy.”

Real estate investment fell 10.2 percent and home sales fell 18.0 percent year-on-year in the first eight months, according to official data also released on Saturday.

Chinese policymakers have stepped up efforts to support the sector, including by lowering mortgage rates and reducing the cost of buying homes, which has partly revitalized demand in major cities.

Smaller cities, which face fewer home-buying restrictions and have high levels of unsold stock, are particularly vulnerable, highlighting the challenges authorities face in balancing supply and demand in different regions.

Of the 70 cities surveyed by the NBS, only two reported house price increases both monthly and annually in August.

“In our view of a worsening slowdown in growth under

new headwinds in S2, we expect Beijing will ultimately be forced to serve as a builder of last resort, directly providing financing to those delayed residential projects that have been pre-sold,” Nomura said in a note of research on Friday.

China could cut interest rates on more than $5 trillion in outstanding mortgage loans as early as this month, according to Bloomberg News.

To support the mortgage rate cut, a cut in the five-year prime lending rate is likely in September, complemented by a 20bp cut in the medium-term lending facility (MLF) and a 50bp cut in the reserve requirement ratio (RRR), economists at ANZ said. in a research note on Friday.

(Reporting by Ella Cao, Liangping Gao and Kevin Yao; Editing by Muralikumar Anantharaman)