New home prices were down 5.3% from a year earlier, the fastest pace since May 2015 China new home prices fall at fastest pace in over 9 years in Aug Only two cities recorded monthly, annual gains in home prices Property investment, sales fell in Jan-Aug Mortgage rate cuts are expected China’s new home prices fell at the fastest pace in more than nine years in August, official data showed on Saturday, as supportive measures failed to spur a meaningful recovery in the property sector. New home prices were down 5.3% from a year earlier, the fastest pace since May 2015, compared with a 4.9% slide in July, according to Reuters calculations based on National Bureau of Statistics, or NBS, data.
In monthly terms, new home prices fell for the fourteenth straight month, down 0.7%, matching a dip in July. The property market continues to grapple with deeply indebted developers, incomplete apartments, and declining buyer confidence, straining the financial system and endangering the 5% economic growth target for the year. A Reuters poll predicted China’s home prices will fall by 8.5% in 2024, and decline by 3.9% in 2025, as the sector struggles to stabilise. China’s property market is still in the process of gradually bottoming out as home buyers’ demand, income and confidence will take some time to recover, said Zhang Dawei, chief analyst at property agency Centaline.
The market is experiencing a downturn, and investors are becoming increasingly cautious. The downturn is attributed to a combination of factors, including rising interest rates, a weakening economy, and a decline in consumer confidence. Rising interest rates have made borrowing more expensive, making it harder for potential buyers to afford homes. A weakening economy has led to job losses and reduced disposable income, further dampening demand.
“With our view of a worsening growth slowdown under new headwinds in H2, we expect Beijing will be eventually forced to serve as the builder of last resort by directly providing funding to those delayed residential projects that have been pre-sold,” said Nomura in a research note on Friday. China may cut interest rates on over $5 trillion in outstanding mortgages as early as this month, according to Bloomberg News. To support mortgage rate cuts, a cut of the five-year Loan Prime Rate is likely in September, complemented by a 20bp cut of the medium-term lending facility, or MLF, and a 50bp cut to the reserve requirement ratio, or RRR, economists at ANZ said in a research note on Friday.
