China home prices drop at faster pace in August before stimulus

CHINA home prices dropped at a faster pace in August, underscoring why policymakers stepped up efforts at the end of the month to address a slowdown that’s weighing on the world’s second-largest economy.

New-home prices in 70 cities, excluding state-subsidised housing, declined 0.29 per cent last month from July when they fell 0.23 per cent, National Bureau of Statistics figures showed on Friday (Sep 15). Existing home prices slid 0.48 per cent from a month earlier, the most since 2014.

China at the end of August unveiled fresh reductions in down-payment requirements for homebuyers and allowed lenders to lower rates on existing mortgages to stimulate purchases. The country’s four biggest cities quickly adopted the measures, though analysts have questioned whether the steps are enough to end the years-long housing crisis.

“While the Chinese government has recently strengthened policy support for the property sector, we expect the impact on property sales to be short-lived and differentiated between tiers of cities,” Moody’s Investors Service analysts said this week, revising their outlook on the sector to negative.

In the latest sign of industry stress, Sino-Ocean Group Holding said on Friday that it has suspended payment on all its offshore borrowings, indicating the downturn is hurting even developers with state links. Meanwhile, industry giant Country Garden Holdings has been trying to stave off a default by seeking to extend bond payments.

So far officials have refrained from resorting to a large-scale bailout for the industry, spurring concerns about the economy and putting the government’s 5 per cent growth target at risk.

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The most recent stimulus resulted in a spurt of home sales in larger cities that is already losing momentum. In Beijing, sales of existing homes plunged 35 per cent to about 1,700 units last weekend from 2,600 in the weekend immediately after the easing, according to estimates from a top property agency in China. New homes sold by developers in the capital city showed a similar trend. BLOOMBERG