BEIJING, March 1 (Reuters) – February marked a troubling month for China’s real estate market, with new home prices plummeting at the fastest rate in over three years, according to a private survey released on Sunday. This decline signals the ongoing difficulties within the property sector, which continues to struggle despite various policy measures aimed at stabilizing it.
The survey conducted by China Index Academy, one of the nation’s foremost property research firms, reported that new home prices across 100 cities fell by 0.04% compared to the previous month. This drop reverses a gain of 0.18% recorded in January and represents the steepest fall since December 2022.
Investors and analysts are now looking ahead to official price data for 70 cities, which will be released on March 16. Notably, this official data has indicated that prices have not seen a monthly increase since May 2023, highlighting a persistent downward trend in the housing market.
This prolonged slump in the real estate sector, once a vital engine of economic growth in China, has substantial implications for household wealth and consumption patterns in the country. As the property market falters, consumer confidence wanes, and spending slows down in what is the world’s second-largest economy.
Despite several rounds of policy measures designed to stimulate demand since the sector began its decline in 2021, such as relaxed purchase rules and lowered down payment requirements, the market remains lethargic. Various cities, including Shanghai, have started to implement new strategies to ease home purchase restrictions. Recently, Shanghai allowed qualified buyers to purchase additional properties and introduced higher mortgage limits in a bid to reinvigorate the housing market.
However, Larry Hu, head of China economics at Macquarie Group, warned in a research note last week that while such measures could provide a temporary boost, they are unlikely to turn around the larger downtrend. He stated, “Such measures could offer a short-term boost to the market, but cannot reverse the broad down-cycle.”
Hu further emphasized the depth of the housing crisis, noting that home prices have now dropped to levels seen in 2016. He believes that reversing this trend would necessitate more rigorous policy interventions to recalibrate market expectations. Despite the crisis, he does not anticipate that policymakers will undertake “unconventional measures” in the near future.
The combination of falling prices and weak demand indicates a challenging road ahead for China’s real estate market, which may require more robust and targeted strategies from the government to stimulate recovery and instill confidence among consumers and investors alike. As the situation evolves, stakeholders will closely monitor any signs of policy shifts or market adjustments that may signal a turnaround in this critical sector of the economy.
