China’s new home prices decline for the first time in 2021.
China's new home prices decline for the first time in 2021.
China’s New Home Prices Fall, Putting Pressure on Authorities to Introduce Stimulus
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BEIJING, Aug 16 (ANBLE) – China’s new home prices fell for the first time this year in July, official data showed on Wednesday, as piecemeal policy support failed to shore up the embattled property sector, heaping pressure on authorities to introduce bolder stimulus.
In a surprising turn of events, new home prices in China experienced their first decline this year. According to data from the National Bureau of Statistics (NBS), prices dropped by 0.2% in July, following a flat reading in June. Compared to the same period last year, prices were down 0.1%. This decline adds to the mounting challenges faced by the property sector, which is suffering from a worsening debt crisis, declining property investment, and sluggish home sales.
China’s property sector makes up a significant portion of its economic activity, accounting for a quarter of its GDP. Despite the extension of financial support for developers and incentives for first-time home buyers and upgraders, the sector continues to struggle. The latest data highlights the ongoing pressure on policymakers to introduce more substantial measures to bolster the industry.
Out of 70 cities surveyed, 49 experienced a decline in new home prices in July. This is a significant increase from the 38 cities that saw a decline in the previous month. The Communist Party’s top decision-making body, the Politburo, acknowledged the market changes and vowed to adjust property policies accordingly.
In an unexpected move, the central bank recently cut key policy rates for the second time in three months to support the faltering economic recovery. Additionally, the central bank announced its intention to guide banks to adjust interest rates on existing mortgages as part of efforts to restore confidence in the housing market.
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Some cities have already taken steps to relax property curbs in an attempt to boost sentiment. However, the response from investors has been tepid thus far, underscoring the magnitude of China’s economic underperformance this year.
It is clear that the current piecemeal policy support is insufficient to revive the property sector and restore confidence. With declining home prices, mounting debt, and sluggish economic growth, authorities are now under increasing pressure to introduce bolder and more effective stimulus measures. As the property sector plays a vital role in China’s economic activity, addressing the challenges it faces has become a top priority for policymakers.
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