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China’s home prices fall at a slower pace as Beijing steps in to resuscitate property sector

In Business
February 23, 2024

Home prices in mainland China fell in January, but the pace of decline slowed for both new and lived-in units amid persistent weakness in consumer sentiment, according to official data.

Prices of newly built homes in 70 large and medium cities fell 0.37 per cent last month, slowing from 0.45 per cent in December, data from the National Bureau of Statistics showed on Friday.

Second-hand home prices dropped 0.68 per cent, compared with a 0.79 per cent slide a month earlier.

Fewer cities saw price erosion last month. New home prices declined in 56 cities, six fewer than December, while existing home prices fell in 68 cities versus all 70 the previous month, the data showed.


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The weak home prices, along with the continued contraction in new home sales, underscore a poor start for China’s property sector this year, Nomura analysts said in a note on Friday. The cut to the five-year loan prime rate (LPR) could have a limited impact, the Japanese investment bank added.

As part of Beijing’s measures to revive the flagging property sector, the People’s Bank of China (PBOC) cut the five-year LPR, against which banks benchmark their mortgage rates, to 3.95 per cent from 4.2 per cent, the largest cut since 2019.

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“We continue to believe the most effective policy to rescue the property sector is for the PBOC to provide funding to help deliver the pre-sold undelivered homes,” Nomura analysts said.

Goldman Sachs said the bigger than expected LPR cut suggested more policy-easing could be on its way to support the sector.

The US investment bank, however, cautioned that “considering persistent property weakness related to lower-tier cities and private developers, such easing measures may only lead to an ‘L-shaped’ recovery in the sector in coming years”.

Among the four biggest metropolises in China, only Shanghai saw an increase in prices of 0.4 per cent in January, while Beijing, Guangzhou and Shenzhen posted declines of 0.1 per cent to 0.7 per cent.

On an annual basis, the housing crisis was more pronounced, with prices of new homes in first, second and third-tier cities falling between 0.4 per cent and 2.1 per cent.


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A Hong Kong court’s order to liquidate China Evergrande Group, the world’s most indebted developer with US$337 billion of liabilities, is likely to further weigh on homebuying sentiment on the mainland, according to a recent Fitch note.

The US rating agency expects China’s new-home sales to decline by up to 5 per cent this year. “Significant downside risk would arise if there is a large-scale suspension of home construction, as it would have a knock-on impact on already weak homebuyer sentiment.

“Such a scenario would conflict with the government’s increasing resolve to stabilise the property sector and contain spillover risk, and is not our base case.”

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