China’s home prices fell again in June, underscoring the challenge for policymakers to halt the property market slump that’s hurting developers and the economy. National Bureau of Statistics figures showed Monday “New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.67% from May, when they slid 0.71%, the most since October 2014.” Values of existing homes declined 0.85%, compared with a 1% decrease a month earlier.
The figures add to evidence that a rescue package unveiled in May has done little to boost sentiment in the real estate market. Yet few expect more aggressive measures to emerge from a key five-year meeting of Chinese Communist Party officials starting Monday. As developers and home owners’ resort to deep discounts to offload homes pressure on prices is likely to remain.
Bloomberg Intelligence analysts Kristy Hung and Monica Si added “Excessive inventory of new and existing homes added pressure for further price drops.”
In May China introduced a broad real estate policy package centered on relaxing mortgage rules and encouraging local governments to buy unsold homes. All four of the nation’s biggest cities. Beijing, Shanghai, Shenzhen and Guangzhou have since rolled out major easing measures for home buyers. Investors and analysts are convinced that the steps will be sufficient due to the limited central bank funding revealed so far and the slow progress of existing trial programs in several cities.
According to Bloomberg Economics, “ Property polices are a key area of focus during the Third Plenum this week, one of the most important political meetings of the Chinese Communist Party. China has the firepower to end its housing crisis, including with a “big-bang solution” that involves pumping money like the Federal Reserve, but it’s unlikely to pull the trigger.”
For now, investors are yet to be swayed that the housing slump has reached a turning point. Shares of Chinese real estate firms have declined further into a bear market, dropping 26% from a mid-May high. Developer China Vanke Co. last week warned of a loss of as much as 9 billion yuan ($1.2 billion) in the first half, as discounts and high land acquisition costs hurt margins. The state-backed company is trying to avoid following the likes of China Evergrande Group and Country Garden Holdings Co. into default.
