BEIJING (Reuters) -China’s new home prices rose at a slower pace in May, while the steepest slump in property investment in over two decades underlined the depth of demand problems in the crisis-hit property sector and pointed to more easing steps on the cards.
For more than a year Beijing has been trying to shore up the vast property industry, a crucial driver of the economy, though demand has failed to fire up amid a lack of confidence.
New home prices in May rose 0.1% month-on-month, slower than a 0.4% gain in March, according to Reuters calculations based on National Bureau of Statistics (NBS) data.
Separate NBS data also showed property investment fell at the fastest pace since at least 2001, down 21.5% year-on-year from 16.2% drop in April, according to Reuters calculations.
Property sales by floor area also slumped deeper, falling 19.7% from 11.8% drop in April.
Taken together, the data point to persistent strains on the sector, which is struggling to stabilize and has been losing recovery momentum in recent weeks.
Additional easing measures are needed to revive the industry, economists say, adding to expectations Beijing will deliver stimulus such as further easing home purchase curbs in first-tier cities.
“In view of the real estate market and macroeconomic situation, the sector must be stabilised and all kinds of more substantial policies must be introduced faster, with major stimulus policies expected to be introduced around July,” said analyst Yan Yuejin at E-house China Research and Development Institution.
Beijing’s broad-based stimulus measures to prop up the embattled property market since late last year had boosted sentiment in the wake of the abrupt end of COVID-19 curbs in December. But the sector is set to grapple with “persistent weakness” for years, Goldman Sachs analysts said this week, adding its problems would continue to drag on economic growth.
In annual terms, prices rose slightly for the first time since April 2022, up 0.1% last month after a 0.2% drop in April.
On the whole, a first-quarter economic rebound sparked by the dismantling of tough anti-virus measures seems to have lost a significant amount of momentum in recent months, prompting China’s central bank this week to cut some short-term interest rates, with expectations of more to come.
China’s central bank cut the borrowing cost of its medium-term policy loans for the first time in 10 months on Thursday.
That could pave the way for the first reductions in the country’s benchmark lending loan prime rates (LPR) in 10 months next Tuesday, analysts said. The five-year LPR is used an as anchor rate for mortgages.
(Reporting by Liangping Gao, Qiaoyi Li and Ryan Woo; Editing by Sam Holmes, Christopher Cushing and Shri Navaratnam)
