BEIJING (Reuters) – Nearly 70 Chinese cities reported declines in new home prices last month, the most since the start of the COVID-19 pandemic, putting more pressure on local governments to quickly roll out additional support measures for homebuyers and developers.
The property sector, which accounts for about a quarter of China’s economy, has lurched from crisis to crisis since the summer of 2020 after regulators stepped in to cut excess leverage, causing some developers to default on their debts and struggle to complete projects, resulting in homebuyers threatening to stop making payments.
In August, 69 out of 100 cities reported a fall in monthly prices, the most since February 2020, according to the China Index Academy on Thursday, one of China’s largest independent real estate research firms. More than 47 cities had reported a fall in prices in July.
New home prices in the 100 cities fell slightly by 0.01% from a month earlier, unchanged from July, said the academy, reflecting the continued chill in the property market.
Home prices in tier-one cities including Beijing and Shanghai fell 0.08%, after a 0.16% fall in July.
Analysts say the weakening prices will continue to hit homebuyer confidence, prolonging the property downturn and suggesting a further loss in economic momentum in a year when President Xi Jinping is expected to secure a precedent-breaking third term as China’s leader.
Responding to the problems in the property sector, China will support genuine demand for housing, state media quoted the cabinet as saying on Wednesday, after a meeting chaired by Premier Li Keqiang.
“Local governments should have ‘one policy for one city’ to make good use of policy tools,” and special loans should be used flexibly to ensure delivery of homes, state media reported.
Local governments are expected to roll out more easing policy measures to boost credit demand, such as further reducing maximum downpayments and lowering mortgage rates, said the China Index Academy.
The country’s central bank last week cut a mortgage rate for home buyers to boost credit demand.
“Beijing may need to consider a more comprehensive solution in its effort to resolve the property market predicament,” economists at Nomura said in a note after the rate cut.
“However, there is a limited likelihood that such a solution will be reached before end-2022.”
(Reporting by Ellen Zhang, Liangping Gao and Ryan Woo; Editing by Simon Cameron-Moore)
