China home prices dropped at a faster pace in August, underscoring why policymakers stepped up efforts at the end of month to address a slowdown that’s weighing on the world’s second-largest economy.
(Bloomberg) — China home prices dropped at a faster pace in August, underscoring why policymakers stepped up efforts at the end of month to address a slowdown that’s weighing on the world’s second-largest economy.
New-home prices in 70 cities, excluding state-subsidized housing, declined 0.29% last month from July, when they fell 0.23%, National Bureau of Statistics figures showed Friday. Other official data showed property investment and residential sales remained weak, even as economic activity picked up.
China at the end of August unveiled fresh reductions in down-payment requirements for homebuyers and allowed lenders to lower rates on existing mortgages to stimulate purchases. The country’s four biggest cities quickly adopted the measures, though analysts have questioned whether the steps are enough to end the years-long housing crisis.
“While the Chinese government has recently strengthened policy support for the property sector, we expect the impact on property sales to be short-lived and differentiated between tiers of cities,” Moody’s Investors Service analysts said this week, revising their outlook on the sector to negative.
Property values are also slumping in the secondary market. Existing-home prices slid 0.48% from a month earlier, the most since 2014, the figures showed.
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Residential sales by value hovered near the weakest monthly level in almost six years, up 2.9% in August from July, according to Bloomberg calculations based on separate official data. Real estate development investment, which contributed about 11% of economic output last year, stayed almost unchanged from July, nearing the lowest level this year.
In the latest sign of industry stress, Sino-Ocean Group Holding Ltd. said on Friday that it has suspended payment on all its offshore borrowings, indicating the downturn is hurting even developers with state links. Meanwhile, industry giant Country Garden Holdings Co. has been trying to stave off a default by seeking to extend bond payments.
So far officials have refrained from resorting to a large-scale bailout for the industry, spurring concerns about the economy and putting the government’s 5% growth target at risk.
Still, economic activity gathered pace in August, adding to cautious optimism that the worst of the downturn is passing even as the property market slump persists. Industrial production rose 4.5% from a year earlier while retail sales jumped 4.6%, the statistics bureau said.
The most recent stimulus resulted in a spurt of home sales in larger cities that is already losing momentum. In Beijing, sales of existing homes plunged 35% to about 1,700 units last weekend from 2,600 in the weekend immediately after the easing, according to estimates from a top property agency in China. New homes sold by developers in the capital city showed a similar trend.
(Updates with other government statistics in the second, fifth and eighth paragraphs)
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