China's housing market struggles continue, with new home prices experiencing their steepest decline in nine years. Official data shows a 4.5% year-on-year drop in June, the lowest since June 2015, and a deeper fall than May's 3.9%. Month-on-month prices also dipped by 0.7%. Despite government efforts to stabilise the USD 18 trillion sector, including reducing home buying costs and converting unsold apartments into affordable housing, challenges persist. Property investment fell 10.1% in the first half of 2024, with home sales by floor area dropping 19%. Analysts remain sceptical about the effectiveness of current policies, predicting continued market difficulties.
China's housing market faces ongoing challenges, with new home prices experiencing their steepest decline in nine years. This comes despite government efforts to stabilise the sector, which is a key part of the Chinese economy, valued at roughly USD 18 trillion.
According to official data released last week, new home prices in China dropped 4.5% year-on-year in June. This marks the lowest price point since June 2015 and is even deeper than the 3.9% decline seen in May. Month-on-month prices also dipped slightly by 0.7%, continuing the downward trend.
The property market downturn began in 2021 and has led to a series of developer defaults, leaving many construction projects unfinished. This has eroded consumer confidence in the sector, which has traditionally been a safe investment choice for Chinese households. At its peak, the property sector contributed roughly 25% to China's GDP, but its current struggles are a drag on the overall economy.
Authorities have implemented various measures to support the market, including reducing home buying costs in major cities and allowing local governments to purchase unsold apartments for conversion into affordable housing. However, some analysts remain sceptical about the effectiveness of these policies.
Zhang Dawei, an analyst at Centaline Property Agency Ltd stated that the market is unlikely to see a widespread rebound. He believes a fundamental shift in supply and demand dynamics exists, and that overly optimistic expectations for these support measures, targeting a market that once saw excessively high prices, are unrealistic.
Separate data indicates further challenges for the market. Property investment fell 10.1% in the first half of 2024 compared to the previous year, representing a significant decline. Home sales by floor area dropped by an even steeper 19%. This decline is worse than the 20.3% slump observed in the first five months of 2024.
A key Communist Party meeting starting this week will address critical economic issues, including the property crisis. Analysts suggest that potential solutions could involve income redistribution from central authorities to local municipalities, aiming to address the financial strain on local governments. Additionally, curbing an addiction to land sales revenue, a practice exposed by the crisis, might be on the agenda.
The future of China's housing market remains uncertain. While government intervention is ongoing, the long-term impact of these efforts and the overall health of the sector are yet to be seen.
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