China home prices drop at faster pace in blow to sentiment

SHANGHAI – China home prices fell more steeply in September, adding to doubts over whether Beijing’s steps to prop up the property market are enough to revive the sector.

New home prices in 70 cities, excluding state-subsidised housing, declined 0.3 per cent last month from August, when they slipped 0.29 per cent, National Bureau of Statistics figures showed on Thursday. Prices slid 0.48 per cent in the secondary market.

Chinese developers are grappling with a prolonged slump

that has starved them of cash, delayed completion of apartments and deprived the economy of a key growth driver. Home sales and property investment remained a drag on economic output in the last quarter, underscoring why policymakers have taken steps recently to rekindle demand.

The real estate crisis marked another grim milestone this week when Country Garden Holdings, once the nation’s biggest builder, signalled that it was likely to default on a United States dollar bond for the first time.

Falling home prices are a deterrent to buyers in a country where property has long been one of the main stores of wealth. Sentiment is also worsening among investors, with a Bloomberg Intelligence index of Chinese developer shares falling to a 14-year low on Wednesday.

The government allowed major cities to reduce payments for home buyers in September in one of the most significant moves to stimulate the housing market. Several other measures, such as relaxing the floor for mortgage rates on first-home purchases, have also taken effect.

There are some signs that the steps are having a positive effect. Outstanding medium- and long-term loans to the household sector, a proxy for mortgage lending, increased by 543 billion yuan (S$104 billion) in September from the previous month, the most since March.

But lukewarm home sales during a recent key holiday season stirred concerns about whether the existing support is enough to spark a recovery.

“Looking ahead, the main risk still comes from the property sector, which is not out of the woods yet,” said Dr Larry Hu, head of China economics at Macquarie Group. BLOOMBERG