China’s home sales post sharpest drop in a year as slowdown worsens
CHINA’S home sales tumbled the most in a year in July, underscoring why policymakers are seeking to address a property slowdown that is weighing on economic recovery.
The value of new-home sales by the 100 biggest real estate developers fell 33.1 per cent from a year earlier to 350.4 billion yuan (S$65.2 billion), according to preliminary data from China Real Estate Information. This was the second consecutive month of declines, after four months of gains. Sales slid 33.5 per cent month on month.
The slump in transactions is a blow to developers who need cash to alleviate a multiyear credit crisis that is showing no sign of easing. Country Garden Holdings, which faces US$2.9 billion in debt payments for the rest of the year, cancelled a share placement overnight, according to IFR.
“The weak sales trend, if continued, will lead to more developers, especially private ones, to default in the near future,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities, before the figures were released.
China’s State Council called on cities to start introducing policies to ensure the healthy development of their property markets, China Central Television reported after a meeting chaired by Premier Li Qiang on Monday (Jul 31).
The Communist Party’s top decision-making body last week pledged to optimise and adjust policies for the property sector. The Politburo also dropped a reference to President Xi Jinping’s mantra that homes are for living in rather than speculation.
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Existing policies have so far failed to sustain a housing rebound, putting the government’s 5 per cent annual economic growth target at risk. Property investment continues to shrink, and home prices have resumed falling.
A private survey by China Index Academy, a real estate research firm, showed that average new-home prices in 100 Chinese cities fell for a third consecutive month in July. New home prices on an average fell 0.01 per cent month on month, unchanged from June and May. Only 35 of the 100 cities reviewed posted a gain in new-home prices.
Future policy optimisation measures are expected mainly in the core Tier-2 and Tier-1 cities, as restrictive policies of the property market in most Tier-2, Tier-3 and Tier-4 cities have been relaxed, the China Index Academy said.
Measures may involve easing mortgage curbs, “reducing the down payment ratio, mortgage interest rate, transaction taxes and fees, and relaxing housing purchase curbs in some areas”, it added. Tier-1 cities including Beijing and Shenzhen have already vowed to implement measures, without giving details.
Chinese authorities are also moving to address developers’ funding strains.
In July, regulators extended loan relief for builders to ensure the delivery of homes under construction. The securities watchdog vowed to ensure developers’ funding in both debt and stock markets.
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