China new home prices fall for first time in 2023, dimming economic outlook

BEIJING - China’s new home prices fell for the first time in 2023 in July, the latest in a string of downbeat data that points to a rapid loss in broader economic momentum and underlines the urgency for bolder policy support to shore up activity.

The 0.2 per cent fall month on month came after June’s flat reading, according to Reuters calculations based on National Bureau of Statistics data. Prices were down 0.1 per cent from a year earlier, after a flat result in June.

The decline in home prices comes amid a worsening debt crisis at major developers, sliding property investment and home sales.

Most analysts expect further downside in home prices and sales over coming months, posing a challenge to policymakers as many sectors of the economy face intensifying pressure amid weak demand.

China’s property sector, which accounts for a quarter of its economic activity, continues to struggle despite an extension of financial support for developers and incentives for first-time homebuyers and upgraders.

Among 70 cities, 49 saw a fall in new home prices month on month in July from 38 cities the previous month.

In July, China’s top leaders in a politburo meeting vowed to adjust property policies. The housing regulator has also urged efforts to prop the sector, such as via lower home mortgage rates and down payment ratios for first-time home buyer and easing mortgage curbs for people who want to upgrade their homes.

Some cities including Zhengzhou have already relaxed a handful of property curbs in efforts to shore up sentiment. Provincial capitals like Xian and Fuzhou are considering reductions in down payments ratio for residents who will buy their second flats.

“We continue to expect more housing easing measures in coming months, including further reduction in down-payment ratios and more relaxation of home purchase restrictions in large cities, among others,” economists at Goldman Sachs said in a note to clients.

However, most economists expect the downside trend in home sales and prices to persist for a while.

“High frequency data in early August does not suggest any meaningful improvement in the property market,” said Dr Wang Tao, head of Asia economics and chief China economist at UBS Investment Bank.

“Without additional major policy easing and/or fiscal support, property sales and investment may weaken further or stay at the bottom for longer than assumed in our baseline,” said Dr Wang. REUTERS