China’s new home prices fell for the second month in a row in September. This was due to mortgage boycotts, a worsening debt crisis, and COVID-19 restrictions, all of which made people less likely to buy a home.
Since mid-2020, when regulators started cracking down on too much borrowing, China’s real estate market has been facing a number of problems. The liquidity crunch has made things worse because developers with too much debt aren’t paying their bond payments, homebuyers aren’t paying their mortgages on stalled projects, and pandemic restrictions are still hurting demand.
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Beijing has made a lot of changes to the housing market, like lowering mortgage rates and giving some homebuyers their income tax back. But demand hasn’t come back yet, and a drop in sales and investments by developers shows how bad the situation is.
“China’s property market is still slow and is expected to stabilise in the fourth quarter, but it is still at a low level,” said Zhang Dawei, chief analyst at property agency Centaline.
Zhang said that falling confidence in the economy has hurt the real estate market, especially since many developers who were short on cash had to stop building projects.
Reuters used data from the National Bureau of Statistics (NBS) that came out on Monday to figure out that the prices of new homes fell 0.2% from August to September. This followed a 0.3% drop in August.
In September, new home prices fell 1.5% from the same month last year, which was the fastest drop since August 2015. In August, prices fell 1.3%.
Weak Towns
Out of the 70 cities that NBS looked at, 54 reported price drops in September. In August, 50 cities reported price drops.
New home prices fell 0.2% in tier-two cities and 0.4% in tier-three cities every month.
In a research note, Goldman Sachs (NYSE:GS) said, “The property markets in lower-tier cities still face strong headwinds from weaker growth fundamentals than in large cities. These include net population outflows and possible oversupply problems.
Separate data from the statistics bureau showed that the sector was still in a long-term slump, with developers struggling with low demand.
According to Reuters calculations based on official data, property sales by floor area fell for the 14th month in a row in September. Sales were down 16.15% year over year, which was a smaller drop than the 22.58% drop in August.
Investment in property fell 12.1% from a year ago, which was a smaller drop than the 13.8% drop in August.
POLICY
China’s leadership shuffle, which happens every 10 years, was finished on Sunday. Xi Jinping got a third term as general secretary of the ruling Communist Party, and his allies filled the new Politburo Standing Committee.
In the full work report of the Communist Party Congress, China said again that “housing is for living, not for speculation.”
Analysts said they didn’t think the Congress would lead to big changes in policy.
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Iris Pang, chief economist for Greater China at ING, said, “There isn’t much room to help real estate developers more because that would hurt the credibility of government reform.” For real estate developers, that means “the deleveraging reform.”
“There could be targeted policies to help mortgage holders who buy unfinished projects, but these policies shouldn’t be seen as giving real estate developers special treatment.”
