China’s housing market weakened further in October, 90% of major cities saw resale prices drop on month

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China’s housing market weakened on all fronts in October, as declines in home prices, sales and property investments widened. Analysts say that there may be a “bottom” by early next year as authorities adjust policies for the sector.

Among the 70 major Chinese cities, 52 saw new home price drop in October from a month earlier, compared to 36 in September, and only 13 cities saw new home price rise, compared to 27 in September, showed data released by the National Bureau of Statistics on Monday.

In the resale market, 64 cities, or about 90% of the 70 major cities, saw month-on-month drops in prices and only 4 cities saw prices grow.

New home prices in the 70 cities fell an average of 0.25% in October from the prior month, faster by 0.08% drop in September, and the drop for resale market was 0.32%, compared to the 0.19% drop in the previous month, according to calculations by E-House China R&D Institute based on NBS data.

Among the four tier-one cities, average new home prices remained unchanged in October from a month earlier. New home prices rose 0.6% in Beijing, gained 0.1% in Shanghai, fell 0.3% in Guangzhou and dropped 0.2% in SHenzhen, said the NBS.

Second-hand home prices in the four cities fell 0.4% in October from a month earlier. Prices in Beijing, Shanghai, Guangzhou and Shenzhen fell by 0.5%, 0.4%, 0.6% and 0.2%, respectively.

In tier-two cities, new home prices fell by 0.2% month on month in October, compared to no change in September, and second-hand home prices in the cities fell 0.3%, faster than the 0.1% drop in the prior month, showed the data.

In smaller tier-three cities, new home and second-hand home price both declined by 0.3% in October from a month earlier, both picking up by 0.1 percentage point from September.

China’s property sales by floor space rose 7.3% year over year in January – October and residential property sales grew 7.1%, showed the NBS data. The value of property transactions increased 11.8%, with value of residential property transactions rising by 12.7%.

In October alone, value of homes sales tumbled 22.65% on year to 1.24 trillion yuan, according to calculations based on the NBS data, the fourth straight decline and the lowest this year.

Separate data from E-House China R&D Institute, second-hand home transactions in 13 top cities tumbled 26.9% in October from a month earlier, slumping 42.8% from the same period last year. In the first ten-months of the year, transactions in the cities fell 2.1% year over year, turning negative for the first time this year.

In particular, second-hand home transactions in Hangzhou, capital of East China’s Zhejiang province fell to 2,554 units last month, the lowest in nearly ten years and shrinking by nearly 80% from the number in March this year, according to E-House data.

In the capital city of Beijing, second-hand home sales plunged 53.4% in October from a year ago to 9,340 units, down 25.7% from a month earlier, according to Centaline Property. The sales have declined for seven consecutive months and dropped below 10,000 units in October for the first time this year.

In the first week of November, second-hand home sales in Beijing fell 26.32% from a month earlier and average price fell 1.74% to 55,464 yuan per square meter, according to Zhege Zhaofang.

On the supply side, new construction starts plunged 33.14% on year in October, extending the 13.54% fall in September, while overall investment by developers in projects dropped 5.4%, deepening from the 3.5% decline a month earlier, showed calculations based on the NBS data.

Tightening of home mortgage loans was one of the major reasons for the cooling housing demand, and on the other hand, property developers have been under mounting operational pressure and forced to offer discounts and home owners are now more willing to lower selling prices given the persistent weakness in the housing market, said Xu Xiaole, chief analyst at Beike Research Institute.

Home prices are expected to see more downward pressure in the short term due to “lower expectation of second-hand home sellers and expected new home discounts at the end of the year,” said Xu.

Notably, Chinese authorities have been sending signals to help stabilize the housing market and analysts expect a bottom by the end of the year or early next year.

“Overall, the ‘bottom’ of real estate policies has emerged, but the market is still adjusting downwards,” said Zhang Dawei, chief analyst with property agency Centaline.

“Policies will become more and more relaxed, and the market is expected to gradually stabilise, as the purpose of regulations is to stabilise the market, with it neither sharply rising or decline,” Zhang said.

Authorities said in September that banks ought to offer financial support for genuine home buyers with so-called “rigid” demand, referring to purchasing or renting from those recently married or seeking low-cost housing. 

“The market is expected to bottom out at the end of the year or early next year,” as supply and demand for mortgages will return to normal, said Xu Xiaole, analyst at Beike Research Institute.