In the latest sign of trouble for China’s property sector, new home prices in the country have continued to decline, with smaller, lower-tier cities experiencing the sharpest falls. According to calculations by Goldman Sachs based on government data, new home prices fell by 2.5% month-on-month on a seasonally-adjusted annualised basis in July, marking a faster decline than the 2.2% drop seen in June.
The decline in prices was particularly pronounced in third- and fourth-tier cities, where prices fell by 3.9% and 3.3% respectively. In first- and second-tier cities, prices saw more modest declines of 0.1% and 0.5% respectively. On a year-on-year basis, the weighted average new home price across 70 large and medium-sized cities remained unchanged.
This slump in new home prices comes at a challenging time for China’s property sector, which is grappling with weakening demand and a renewed liquidity crisis. The sector has been hit hard by the aftermath of the COVID-19 pandemic as buyers become more cautious and developers face difficulties in securing funding.
As the market continues to face headwinds, Chinese authorities have been implementing measures to support the sector and stabilize home prices. These measures have included easing restrictions on property purchases and providing liquidity support to developers. However, it remains to be seen if these measures will be enough to reverse the downward trend in prices.
Analysts are closely watching the situation as the housing market plays a crucial role in China’s economy. A slowdown in the property sector could have wide-ranging consequences, affecting industries such as construction, manufacturing, and banking. It is also likely to impact consumer sentiment and domestic spending.
The decline in new home prices, especially in smaller cities, raises concerns about the overall health of the property market in China. It suggests that challenges facing the sector are not limited to the major urban centers but are also spreading to less developed areas. As the Chinese government continues to navigate this challenging landscape, all eyes will be on its efforts to stabilize the property market and mitigate the potential risks to the broader economy.