©Reuters. File photo: Home buyers stand near a window at an unfinished residential building of Gaotie Wellness City complex in Tongchuan, Shaanxi province, China, September 12, 2023. REUTERS/Tingshu Wang/File Photo
By Liangping Gao and Ryan Woo
BEIJING (Reuters) – Prices of new homes in China fell for an eighth straight month in February, official data showed on Friday, suggesting the fragile property market is struggling to find a bottom despite a raft of measures to support the sector.
According to Reuters calculations based on data from the National Bureau of Statistics (NBS), new home prices fell 0.3% month-on-month, in line with January’s decline.
On a year-over-year basis, prices fell 1.4%, faster than January’s 0.7% decline and the biggest drop in 13 months.
The real estate sector has lurched from one crisis to another since 2021, after a regulatory crackdown on developers’ high leverage led to a liquidity crisis.
So far, authorities have not launched massive stimulus to support developers, but have instead taken incremental measures to revive the sector, but with limited effects.
Analysts attributed the price decline to a slow season and disruptions caused by the eight-day Lunar New Year break.
“It will take time for demand, homebuyer income and confidence to recover this year,” said Zhang Dawei, an analyst at real estate firm Centaline, who expects prices in first-tier cities to rise slightly in March.
In January, China launched a “white list” mechanism that orders state banks to increase lending to residential projects. Other major cities, including Shanghai and Shenzhen, have also eased purchasing curbs to attract home buyers.
Home prices fell in 59 cities in February, compared to 56 the previous month. Three of the four first-tier cities, including Beijing and Shenzhen, recorded month-on-month price declines last month.
“Falling real estate prices will create a negative wealth effect, acting as a drag on consumption,” said Lynn Song, chief Greater China economist at ING.
“Measures including the lifting of purchasing restrictions, whitelisting of real estate projects and February’s cut in the prime rate on five-year loans to help reduce mortgage rates are steps in the right direction, but further policies may still be needed supporting”.
Last month, China announced its biggest-ever reduction in its benchmark mortgage rate to support its struggling property market.
Premier Li Qiang, in his government work report presented to parliament in early March, promised to stabilize the real estate sector with targeted measures by providing financing for “justified” projects.
Nie Wen, an economist at Hwabao Trust, said sales in first-tier cities will improve in March, but it remains to be seen whether overall property sales will manage to bottom out.
The statistics office will publish data on property sales and investment on Monday.