China's property slump deepens as prices decline

BEIJING • China's home slump deepened last month as declines in prices, sales and property investments widened, adding pressure on the authorities to stabilise the market.

New-home prices in 70 cities slid 0.25 per cent last month from September, when they fell for the first time in six years, National Bureau of Statistics figures showed yesterday.

Residential sales dropped 24 per cent from a year earlier, the most since last year, striking a blow to developers during what is traditionally a busy season, Bloomberg calculations based on official data showed.

The figures may add to speculation that regulators will consider easing their clampdown on leverage in the real estate industry as the property downturn risks derailing China's economic recovery.

A liquidity crisis at industry giant China Evergrande Group is spreading to its competitors, which are struggling to refinance their debts, particularly in the offshore junk dollar bond market.

"The slowdown in the property sector is the key risk for the macro outlook in the next few quarters," Pinpoint Asset Management chief economist Zhang Zhiwei wrote in a note.

Falling prices may dissuade home buyers concerned about the value of their assets, making it harder for developers to sell properties and generate much-needed cash.

Last month's drop in prices, which excludes state-subsidised housing, deepened from 0.08 per cent in September. Home values in the secondary market fell 0.32 per cent, the largest decline since February 2015.

Property firms refrained from expenditure, resulting in a widening 5.4 per cent year-on-year contraction in real estate development investments, according to Bloomberg calculations.

New starts by developers, a leading indicator of investments, plunged 33 per cent from a year earlier, and their land purchases shrank 24 per cent from September.

Still, China's banking regulator is sticking to its deleveraging line, saying late last Friday that the government will continue to curb the "financialisation of real estate" and prevent bubbles in the sector.

It will maintain stable prices of land and housing, the China Banking and Insurance Regulatory Commission said.

Other figures released yesterday pointed to the economy stabilising last month. Retail sales and industrial output beat estimates, and the jobless rate was steady.

"The government would want to limit the negative impact on the economy and financial sector from a sharp property downturn," UBS Group economists led by Dr Wang Tao wrote in a note last week.

BLOOMBERG