‘Under Pressure’: China’s Property Market Hit by More Headwinds | Investment News

By Liangping Gao and Ryan Woo

BEIJING (Reuters) – China’s property market suffered more headwinds in November as house prices, sales, investment and construction all fell, weighed by weak demand and a shortage of cash among developers.

New home prices fell 0.3% month on month in November, the biggest drop since February 2015, according to Reuters calculations based on data released by the National Bureau of Statistics (NBS) on Wednesday. This was worse than the 0.2% decline in October.

Only nine of the 70 cities tracked by the NBS recorded monthly price increases in November, the lowest since February 2015, according to Reuters calculations.

In a separate statement from the BNS, home sales by value fell 16.31% in their fifth month of decline, indicating sluggish demand despite moves by some cities to boost transactions.

“Cities of all classes are under pressure,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute.

“The current breadth of market supply is large and demand is weak. The key is to accelerate the destocking of inventory to stabilize house prices.”

China’s real estate sector has grappled with tougher regulations this year, including restrictions on bank lending and limits on how much property developers can borrow amid growing financial difficulties.

Last week, China Evergrande Group and another major developer, Kaisa, missed payment deadlines on their offshore obligations, prompting Fitch to downgrade the companies to “restricted default” status.

New home prices have fallen in 64 of 70 cities so far this year, according to Reuters calculations.

On the supply side, housing starts as measured by floor area fell 21.03% year on year in November, down for the eighth month, while property investment by developers fell 4, 3%.

“Due to the dual impact of the cyclical downturn and (government) policies, coupled with debt crises among some developers, the real estate shock has not yet passed, but with the right policy response, systemic risks can be avoided” , said Zhang Yi. , chief economist at Zhonghai Shengrong Capital Management.

China’s top leaders said “houses are for living in, not for speculation” at an agenda-setting meeting on Friday. They are also committed to fostering the healthy development of the real estate market and better meeting reasonable demand from homebuyers.

“The Central Economic Work Conference has set the tone for stabilizing growth for next year, so we believe that as government policy takes effect, economic growth in the fourth quarter and first quarter of next year will bottom out and rebound,” Zhang said.

At least six cities have introduced measures to boost home purchases since November, including providing grants or deed tax cuts, local media reported.

The stock of unsold homes in China’s 100 largest cities hit its highest level in five years in November, according to a private sector survey last Friday.

New home prices fell 0.4% month over month in Tier 2 cities and 0.3% in Tier 3 and 4 cities, compared to zero growth in Tier cities 1 last month.

Ratings agency S&P expects the real estate slowdown to continue due to the credit crunch and restrictive policies in the sector, which could lead to a 10% decline in home sales nationwide. national next year.

(Reporting by Liangping Gao and Ryan Woo; Additional reporting by Stella Qiu; Editing by Ana Nicolaci da Costa and Sam Holmes)

Copyright 2021 Thomson Reuters.