China’s New Home Prices Remain Stagnant, Putting Pressure on Policymakers
In June, China’s new home prices showed no change, marking the weakest performance of the year. This data, released on Saturday, has increased the urgency for policymakers to implement more stimulus measures as the country’s economic recovery faces challenges.
Compared to the previous month, where there was a modest 0.1% increase, the flat result in June indicates a slowdown in price rises nationwide. Additionally, prices remained unchanged from the previous year, reversing the 0.1% increase observed in May.
The real estate sector, which accounts for a significant portion of China’s economy, experienced a sharp decline last year due to developer defaults and suspended construction projects. In response, both central and local governments, along with regulators, have introduced various policies to support the sector.
These measures range from extended financial support for developers to incentives for homebuyers. However, the uncertain economic outlook and persistent weaknesses in the real estate market have dampened confidence and demand, hindering hopes for a swift recovery.
The decline in home prices, coupled with falling exports, is adding pressure on policymakers to take further action to support the real estate market and boost sluggish demand.
There is widespread anticipation for additional stimulus measures to be announced during a meeting of the ruling Communist Party’s Politburo later this month. This meeting will set the tone for economic policies in the second half of the year.
Analyst Chen Xiao from property data provider Zhuge House Hunter emphasizes the need for strong policies to restore confidence in the property market. He believes that small-scale policies are no longer sufficient to address the diminishing sentiment and suggests strengthening measures such as employment and income support to encourage home buying.
Out of the 70 cities monitored by the National Bureau of Statistics (NBS), only 31 recorded month-on-month increases in new home prices in June, compared to 46 in May. While prices remained steady in tier-one and tier-two cities after rising in May, they experienced a 0.1% decline in tier-three cities.
Zou Lan, a senior official at the People’s Bank of China (PBOC), stated that there is room for “marginal optimization” of property policies considering the significant changes in supply and demand in the real estate market.
Goldman Sachs economists mentioned in a research note that PBOC officials hinted at further easing of property policies during a press conference. They also anticipate the July Politburo meeting to highlight the importance of stabilizing the property market.
In November, the central bank extended certain policies until the end of 2024 as part of a rescue package for the struggling real estate sector. However, the uncertain economic outlook and weakness in the sector have affected confidence, diminishing hopes for a quick recovery.
A quarterly survey conducted by the PBOC revealed that 16.5% of households anticipate a decline in housing prices in the third quarter, a decrease from the previous quarter’s figure of 14.4%.
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