China: fifteenth consecutive month of decline in property prices. The destruction of savings continues

New home prices fell for the 15th consecutive month, falling 5.7% in 70 mainland cities from a year earlier, marking the biggest monthly drop since May 2015.

The decline increased from July's 5.3% decline, according to SCMP calculations based on data published by the Office for National Statistics on Saturday. Prices fell 0.3% last month in four cities in China.

According to the data, prices fell 0.3% last month in four of China's so-called Tier 1 cities – Beijing, Shanghai, Guangzhou and Shenzhen – often used as a barometer of the country's economic growth. The declines were steepest in Tier 2 cities such as Tianjin, Dalian and Wuhan, where new home prices fell 0.7% last month, following a 0.6% decline in July.

The 35 smallest cities in the sample fared the worst: Prices fell 0.8% last month in places like Yangzhou, Huizhou and Dali, up from a 0.7% decline in July and to the 0.6% contraction in June. The failure of the Chinese real estate market hurts workers first and foremost. So the metropolises bear the price, but the medium-sized cities are the ones that pay the most for the crisis.

A look at the Chinese real estate market: unpaid workers and silent construction sites

The report highlights concerns about China's collapsing property market, fueling speculation that Beijing will cut mortgage rates to stimulate demand or ease repayment burdens. Beijing's 300 billion yuan ($41.9 billion) in loans to buy unsold homes from troubled builders have so far done little to restore confidence: the conditions are too tight and the funds are insufficient.

“Although Beijing has introduced many measures to support the real estate sector, many of them have been implemented too slowly to have an impact,” said Raymond Cheng, managing director of CGS International Securities, after the data was released. “China could cut outstanding mortgage rates by up to 50 basis points as soon as this month, according to a Bloomberg report on Thursday. The country's central bank chief pledged last month to maintain a supportive monetary policy in a bid to support the economic recovery.

Once a mainstay of the economy, the real estate sector has become a drag since August 2020, when the government launched the “three red lines” policy to curb excessive leverage among the country's developers and stem systemic risks. The resulting liquidity squeeze has led to record defaults among the weakest borrowers, including China Evergrande, Country Garden Holdings and Kaisa Group. Contract sales recorded by China's top 100 builders fell 10% to 251.2 billion yuan in August from July, according to China Real Estate Information Corp., and 27% from a year earlier.

The market for used or second-hand homes is not doing any better. Inhabited house prices fell 0.9 percent on average in August in Beijing, Shanghai, Guangzhou and Shenzhen, up 0.4 percentage points from the previous month, according to the statistics bureau. Prices in 66 Tier-2 and Tier-3 cities lost 1% and 0.9%, respectively, an increase from the previous month. China's gross domestic product increased 4.7%, slower than the expected, in the second quarter, after the 5.3% expansion in the previous three months.

Solving the problems of the real estate market will be an essential step if we want to be able to resume a path of rapid growth for the Chinese economy, but the government will have to find a way to really come up with important figures. Otherwise the savings of the Chinese will not be mobilizable for consumption.

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The article China: fifteenth consecutive month of decline in property prices. The destruction of savings continues comes from Economic Scenarios .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cina-quindicesimo-mese-successivo-di-calo-dei-prezzi-degli-immobili-prosegue-la-distruzione-dei-risparmi/ on Sat, 14 Sep 2024 19:22:38 +0000.