Chinese Home Prices Experience Steepest Drop in Almost Nine Years

Chinese home prices in major cities have witnessed a fourth consecutive monthly decline in October, marking the sharpest drop in nearly nine years. Despite measures to support the market, demand continues to slump, reflecting a challenging environment for the real estate sector. Data from the National Bureau of Statistics revealed that prices of new homes in 70 medium and large cities fell by 0.4% month-on-month, the most significant decrease since February 2015. This comes after a 0.3% decline in September. Of the cities tracked, 56 saw prices of new homes fall in October, with 67 experiencing a drop in prices of lived-in homes. Analysts attribute the lackluster home price data to a fluctuating market and substantial discounts offered by developers and local governments.

The contraction in property investment was reported on Wednesday, with real estate investment falling by 9.3% in the first 10 months compared to the previous year. This represents a worsening from a 9.1% contraction in the first nine months. Despite Beijing's measures, including mortgage rate cuts and lowered thresholds for first-time buyers, the property market has not experienced the expected revival, signaling a deteriorating sector. Home sales at the top 100 developers in the country declined by 27.5% year-on-year in October to CNY 406.7 billion (USD 56 billion), with a marginal 0.6% increase from September.

Tier 1 cities such as Beijing, Guangzhou, and Shenzhen recorded month-on-month price declines ranging from 0.4% to 0.7% for new homes in October, except for Shanghai, where prices rose by 0.2%. In tier 2 cities, prices fell by 0.2%, and in tier 3 cities and elsewhere, the decline was steeper at 0.5%. Second-hand home prices in tier 1 cities witnessed an 0.8% decrease, compared to a 0.2% increase in September.

Analysts, including Zhang Bo, Chief Analyst at 58 Anjuke Real Estate Research Institute in Shanghai, noted that there are many uncertainties in the recovery of the housing market. Tier 1 cities continue to underperform, with supportive measures from Beijing, Shanghai, and Shenzhen deemed insufficient. Japanese investment bank Nomura suggested that China's property sector has yet to bottom out, cautioning that the market might have been too optimistic about property stimulus policies in recent months. The bank estimates a potential social issue regarding home delivery as an increasing number of pre-sold units remain unconstructed or delayed, with a funding gap of around CNY 3.2 trillion to complete remaining units.

The challenges faced by the Chinese property market underscore the complexity of balancing policy measures and market dynamics amid economic uncertainties.

By fLEXI tEAM