© Reuters. FILE PHOTO: A person works at a residential building construction site in Beijing, China September 6, 2023. REUTERS/Tingshu Wang/File Photo
By Liangping Gao and Ryan Woo
Market Trends
In China, the downward trend in new home prices continued in January, even as major cities showed signs of stabilization. Despite government interventions aimed at boosting demand, the overall market saw a decrease in prices.
According to Reuters calculations based on National Bureau of Statistics (NBS) data, new home prices dropped by 0.3% month-on-month in January, following a 0.4% decrease in December.
Government Measures
Beijing has implemented various measures to counter the property market slowdown, such as directing state-owned banks to increase lending for residential projects through a “whitelist” system. Additionally, cities like Shanghai have relaxed home purchase restrictions to attract buyers.
In tier-one cities, the decline in home prices eased slightly in January compared to the previous month, partly due to supportive measures like reduced down payment requirements.
Regional Variances
Among the 70 cities surveyed by the NBS, Shanghai saw a month-on-month price increase of 0.4%, while tier-one cities like Beijing, Guangzhou, and Shenzhen reported smaller price drops compared to tier-two and tier-three cities.
Although fewer cities experienced price declines in January, overall market sentiment remained weak, with a clear downward trend still present.
Market Outlook
Year-on-year, home prices in China fell by 0.7%, the largest drop in ten months. Despite a lower base in January 2023 due to the impact of COVID-19, analysts predict that price declines may persist for some time before a full market recovery.
Economic Impact
Recent data from the central bank showed a significant increase in household loans in January, primarily for personal consumption rather than home purchases. Analysts suggest that improved income prospects are necessary for a recovery in real estate investment.
Future Prospects
The property market has faced challenges since 2021, with defaults among highly-leveraged developers contributing to the downturn. To restore market confidence, policymakers have introduced supportive measures, including a reduction in the benchmark mortgage rate.
Analysts anticipate that it will take time for buyer incomes, confidence, and overall demand to rebound in the property sector. While the market is showing signs of stabilization, a full recovery is expected to be gradual.