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China's new home prices continued to decline in the past month, reflecting persistent weakness in the property sector despite policy easing measures. Official data showed monthly prices fell 0.4 per cent, while annual declines deepened to 3.1 per cent, the sharpest in several months. Weak demand, high inventories in smaller cities, and ongoing funding stress for developers continue to weigh on the market. Although leverage caps have been removed and state firms are buying distressed projects, analysts see recovery as gradual and uneven.
China's new home prices continued to fall during the past month, underlining the property sector's struggle to recover from a prolonged downturn that began in 2021. Official data released recently showed that weak buyer demand remains entrenched despite multiple policy steps taken by Beijing, keeping pressure on heavily indebted developers and weighing on the broader economy. Market participants have been closely tracking signs of stabilisation, but conditions suggest that a clear turnaround is still some distance away. Advertisement
According to calculations based on figures from the National Bureau of Statistics, prices of new homes declined by 0.4 per cent on a month-on-month basis, the same pace as seen previously. On an annual basis, prices were lower by 3.1 per cent, marking the sharpest yearly decline in about seven months and an acceleration from the earlier contraction. The data reinforced concerns that policy support has yet to translate into sustained buying interest.
The extended slump has continued to erode household wealth as falling property values reduce consumer confidence. This has constrained spending at a time when authorities are attempting to rebalance growth by encouraging consumption and limiting industrial overcapacity. A revival in home purchases is also critical for developers, many of whom rely on steady sales to service debt and complete housing projects that were sold in advance.
Zhang Dawei of Centaline Property said the recovery remains fragile, pointing to unresolved issues such as high housing inventories in lower-tier cities and subdued demand. He noted that while the pace of monthly price declines may ease as supportive measures gradually take effect, smaller cities will need more time to clear excess supply, keeping downward pressure on prices in the near term.
Beijing has introduced a series of steps since the crisis first rippled through the economy, including easing home purchase restrictions and lowering down-payment requirements. State-owned firms have also begun acquiring distressed or foreclosed property projects, signalling a more direct attempt to tackle oversupply. However, these efforts have yet to deliver a broad-based recovery across the sector.
Data showed that out of 70 cities tracked, 62 recorded price declines, compared with 58 previously. Conditions in the resale market also remained weak. While month-on-month falls moderated slightly, year-on-year declines deepened, with prices dropping 7.6 per cent in top-tier cities and more than 6 per cent in smaller urban centres.
State media reported recently that authorities have removed the so-called three red lines policy, which had imposed limits on developers leverage ratios. Introduced in 2020, the framework contributed to a liquidity crunch that left many builders short of funds and unable to complete presold homes. Despite the removal of these caps, analysts say funding stress_toggle persists as developers retreat from the high-debt model that fuelled the earlier boom.
A research note from S&P Global Ratings projected that China's primary property sales could decline by 10 to 14 per cent in 2026, reflecting continued oversupply and price pressure. The agency added that addressing the scale of excess inventory would likely require stronger government intervention, noting that clear signs of such decisive action are still limited.
Source Reuters
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