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China’s home prices continued to decline in June, but at a slower pace, after many local governments relaxed property curbs to support the struggling housing market.
New home prices in the 70 major cities slipping 0.1% from the previous month, compared to 0.17% drop in May, showed calculations by the E-House China R&D Institute based on the data released by the National Bureau of Statistics on Friday. The prices were down1.3% from a year earlier.
Second-hand home prices in the major cities fell 0.2% on month in June, down 2.7% from a year earlier, showed the calculations.
In breakdown, ew home prices in the four tier-one cities rose 0.5% in June from the prior month, expanding by 0.1 percentage points from May, and second-hand home prices in the cities grew 0.1%, compared to no change in May, according to NBS data.
In tier-two cities, new home prices gained 0.1% on month in June, climbing back from a drop in May; and second-hand home prices declined 0.1%, narrowing by 0.2 percentage points from May, said the NBS.
In smaller tier-three cities, new home prices fell 0.3% in June from the month before, in line with the drop in May; and second-hand home prices fell 0.3% on month, narrowing from 0.5% drop in May, showed the data.
Of the 70 major cities, 31 saw new home price rise in June from the month before, compared to 25 in May, while 38 cities saw new home prices decline on month, compared to 43 in May, according to the NBS.
The city of Chengdu, capital of Southwest China’s Sichuan province, led the gain with new home prices growing by 1.3% on month in June. New home prices in the four tier-one cities – Beijing, Shanghai, Guangzhou and Shenzhen- grew by 0.8%, 0.5%, 0.3% and 0.2%, respectively, said the NBS.
Twenty-one cities saw second-hand home prices rise on month in June, more than 15 in May, while 48 cities saw second-hand home prices decline, compared to 53 in May, showed the data.
“Weak market sentiment continues to weigh on the performance of property sales,” said Martin Wong, director and head of research and consultancy for Greater China at Knight Frank. “There remain worries about economic performance and debt issues. Prices will remain under pressure in the short term.”
Separately, China’s property sales by floor area reached 180 million square meters in June, with that of residential properties amounting to 150 million square meters, rising 65.8% and 65% from the previous month, but remained the lowest level in nearly four years. Compared to the same period in 2021, the figures were down 18.3% and 21.8%, respectively.
However, the housing market’s performance in June was the e in the first half of the year after several local governments relaxed property curbs, said Chen Xiao, senior analyst at Zhege Zhaofang Data Research Center.
The market is expected to see more notable improvement in the fourth quarter as Covid epidemic get contained, said Chen.
According to data from Centaline Property, local governments relaxed housing policies by 460 times in the first half of the year, increasing by 61% from the same period last year, marking a new record for six-month period.
The housing market is showing increasing distress in recent days. Contagion is spreading to the financial system as a growing number of homebuyers are refusing to pay mortgage for the properties they purchased that have been left unfinished due to liquidity difficulties in the real estate sector.
The delayed projects make up about 1% of China’s total mortgage balance, according to Jefferies. Should every buyer default, that would lead to a 388 billion yuan increase in non-performing loans, it said.
“We maintain our view that although we expect property activities may improve sequentially through the remainder of this year from their April – May trough, the extend of the recovery may not be sufficient to make up the economic loss over the past year,” according to a research note by Goldman Sachs.