New home prices in China saw a notable increase of 0.29% in October, the highest monthly growth in six months, according to a survey by China Index Academy. This follows a 2.08% year-on-year price rise, signaling potential recovery in a sector heavily impacted by a government crackdown on borrowing since 2021. Government measures, including lower down payment requirements, have contributed to price increases, particularly in major cities like Shanghai. However, challenges remain, especially in smaller cities, where home prices dropped by 0.02%. Sustained recovery may depend on effective government support and the delivery of pre-sold homes.
Recent data indicates that the prices of new homes in China have risen more sharply in October, signaling a potential turnaround in a market that has faced significant challenges over the past few years. According to a private survey from China Index Academy, the average new home price across 100 cities increased by 0.29% in October, up from a 0.14% rise in September. This marks the highest monthly growth in six months, providing some hope amidst a prolonged downturn that has affected the country's economy.
On a year-on-year basis, home prices grew by 2.08% compared to a 1.85% increase in September. While the increase is encouraging, it's important to note that the housing market once represented about 25% of China's GDP, and its struggles have significant implications for broader economic health. The decline began in 2021, when a government crackdown on excessive borrowing led to many developers facing liquidity issues, causing a dip in construction and home sales.
To combat the ongoing slump, government officials have introduced several measures aimed at boosting the real estate sector. Notably, these include lowering the minimum down payment requirement to 15% across all housing categories and easing restrictions on home purchases. These initiatives appear to be yielding results, particularly in major cities such as Shanghai, which recorded the largest increase in home prices at 1.09% month-on-month.
While these developments might signal a recovery, they also highlight a growing divide between large urban centers and smaller cities. Despite the overall rise in prices, smaller cities continue to experience difficulties, with home prices dropping by 0.02% from the previous month. The cautious sentiment among buyers reflects a broader unease in the market, particularly as the sales of new homes by value dropped significantly by 34.7% from January to October of this year.
Economists at Nomura pointed out that the surge in home prices in major cities could be attributed to pent-up demand following the recent easing measures. However, they caution that this uptick might not be sustainable, highlighting that similar brief recoveries have occurred in the past without leading to long-term stability in home prices. For a more enduring recovery, there needs to be a concerted effort to ensure that pre-sold homes are delivered, especially in low-tier cities where demand remains weak.
Moreover, analysts suggest that direct funding support from the central government could be more effective in reviving the market. As the situation continues to evolve, stakeholders in China's real estate sector will be closely monitoring how these policies impact both large urban markets and smaller cities that have yet to see significant improvement.
In conclusion, while October's data brings a glimmer of hope to China's property market, challenges persist that require careful navigation and additional support from policymakers if a more stable recovery is to be achieved.
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