Property prices in China continue to fall despite government efforts to save the market

Property prices in China continue to fall despite government efforts to save the market

Property prices in China continue to fall despite government efforts to save the market

Costfoto/NurPhoto/Getty Images

High-rise buildings are seen in downtown Chongqing, southwest China, on May 9, 2024.

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Hong Kong

China’s new home prices last month suffered their biggest drop in nearly a decade, a sign that Beijing’s “historic” housing bailout has yet to revive demand.

Prices in 70 major cities fell by 0.7% in May compared to April, figures from the National Bureau of Statistics (NBS) showed on Monday. That’s the biggest month-on-month drop since October 2014, according to Reuters calculations.

According to separate calculations by Macquarie Group, existing house prices in those cities fell 7.5% year-on-year last month, marking the biggest drop on record.

A month ago, Beijing unveiled sweeping measures to rescue the crisis-hit housing market, including requiring local governments across the country to buy unsold homes from beleaguered developers and relaxing rules on purchases.

“To be fair, one month is too short for the housing rescue package to take effect,” analysts at Societe Generale said on Monday.

The measures, including efforts to provide cheap loans to state-owned enterprises to buy unsold homes from struggling developers, will “take time” to have an impact on the housing market, analysts said.

However, other real estate figures remain bleak.

Property investments for the first five months of the year fell by 10.1% compared to a year ago, according to the SNB on Monday.

New property sales fell by 28% over the same period.

Some parts of the Chinese economy reported a more upbeat picture, according to a separate set of leading indicators released by the NBS on Monday.

Retail sales rose 3.7 percent in May, accelerating from a 2.3 percent increase in April and beating market forecasts.

Much of this boost came from the government’s massive trade-in programs for used cars and old appliances, designed to boost domestic consumption. The Labor Day “Golden Week” holiday, which ran from May 1 to May 5, also helped reignite some consumer spending.

Industrial production has lost some of its momentum, up 5.6 percent in May from a year ago, compared with April’s 6.7 percent rise. Fixed asset investment also missed expectations.

But China’s exports rose 7.6 percent in May, marking the fastest pace since April 2023, according to customs data released earlier this month. Imports, however, were below estimates.

“Growth is highly uneven,” with exports as a driver and the real estate sector acting as a drag, Macquarie analysts said.

The threat of deflation continues to haunt the world’s second largest economy as domestic demand remains weak.

The consumer price index only increased 0.3% in May, unchanged from April, according to the SNB last week. It was a little below expectations.

Producer prices fell 1.4% for the 20th consecutive month.

“While China’s growth remains uneven, we believe more policy support is likely to come in to help keep growth on track for this year’s GDP growth target (of around 5%),” they said HSBC analysts said.

“More attention will turn to next month’s (Communist Party) Third Plenum, which will highlight economic reforms for the coming years,” they said.