China’s new home prices fell in July, marking the first decline this year. This downward trend in prices is indicative of a broader loss in economic momentum and highlights the need for more aggressive policy support to stimulate activity. According to data from the National Bureau of Statistics (NBS), prices dropped by 0.2% on a monthly basis and 0.1% compared to the previous year.
The decline in home prices is occurring alongside a worsening debt crisis among major developers, as well as a decrease in property investment and home sales. Analysts predict further declines in prices and sales in the coming months, posing a challenge for policymakers as weak demand puts pressure on various sectors of the economy.
This latest data adds to a series of weak economic indicators in recent months, prompting calls for authorities to implement more robust support measures to counteract the downward trajectory of growth. Despite financial support for developers and incentives for first-time home buyers and upgraders, China’s property sector continues to struggle.
Out of 70 cities, 49 experienced a decline in new home prices in July compared to 38 cities the previous month. In response, China’s top leaders have pledged to adjust property policies, and the housing regulator has called for efforts to bolster the sector through measures such as lower mortgage rates and down payment ratios for first-time buyers, as well as relaxed mortgage curbs for those looking to upgrade their homes.
Some cities, including Zhengzhou, have already relaxed certain property restrictions to boost sentiment, while provincial capitals like Xian and Fuzhou are considering reducing down payment ratios for residents purchasing their second homes. Economists at Goldman Sachs anticipate further housing easing measures in the coming months, including additional reductions in down-payment ratios and further relaxation of home purchase restrictions in large cities.
However, despite these measures, most economists expect the downward trend in home sales and prices to persist. High-frequency data from early August does not indicate any significant improvement in the property market, leading experts to believe that without major policy easing or fiscal support, sales and investment in the property sector may continue to weaken or remain stagnant for longer than initially assumed.
In conclusion, China’s new home prices experienced a decline in July, reflecting a broader loss in economic momentum. The worsening debt crisis among major developers, along with decreased property investment and home sales, further contribute to the challenges faced by policymakers. While some cities have implemented measures to support the property sector, economists anticipate the downward trend to persist without additional major policy easing or fiscal support.
