50% Off! Beat the market in 2025 with InvestingProCLAIM SALE

China's slower home price growth, deepening investment slump signal more easing

Published 06/14/2023, 09:44 PM
Updated 06/14/2023, 11:20 PM
© Reuters. FILE PHOTO: Residential buildings  are pictured near a construction site in Beijing, China April 14, 2022. Picture taken April 14, 2022. REUTERS/Tingshu Wang
GS
-

BEIJING (Reuters) -China's new home prices rose at a slower pace in May, while the steepest slump in property investment in over two decades underlined the depth of demand problems in the crisis-hit property sector and pointed to more easing steps on the cards.

For more than a year Beijing has been trying to shore up the vast property industry, a crucial driver of the economy, though demand has failed to fire up amid a lack of confidence.

New home prices in May rose 0.1% month-on-month, slower than a 0.4% gain in March, according to Reuters calculations based on National Bureau of Statistics (NBS) data.

Separate NBS data also showed property investment fell at the fastest pace since at least 2001, down 21.5% year-on-year from 16.2% drop in April, according to Reuters calculations.

Property sales by floor area also slumped deeper, falling 19.7% from 11.8% drop in April.

Taken together, the data point to persistent strains on the sector, which is struggling to stabilize and has been losing recovery momentum in recent weeks.

Additional easing measures are needed to revive the industry, economists say, adding to expectations Beijing will deliver stimulus such as further easing home purchase curbs in first-tier cities.

"In view of the real estate market and macroeconomic situation, the sector must be stabilised and all kinds of more substantial policies must be introduced faster, with major stimulus policies expected to be introduced around July," said analyst Yan Yuejin at E-house China Research and Development Institution.

Beijing's broad-based stimulus measures to prop up the embattled property market since late last year had boosted sentiment in the wake of the abrupt end of COVID-19 curbs in December. But the sector is set to grapple with "persistent weakness" for years, Goldman Sachs (NYSE:GS) analysts said this week, adding its problems would continue to drag on economic growth.

In annual terms, prices rose slightly for the first time since April 2022, up 0.1% last month after a 0.2% drop in April.

On the whole, a first-quarter economic rebound sparked by the dismantling of tough anti-virus measures seems to have lost a significant amount of momentum in recent months, prompting China's central bank this week to cut some short-term interest rates, with expectations of more to come.

© Reuters. FILE PHOTO: Residential buildings  are pictured near a construction site in Beijing, China April 14, 2022. Picture taken April 14, 2022. REUTERS/Tingshu Wang

China's central bank cut the borrowing cost of its medium-term policy loans for the first time in 10 months on Thursday.

That could pave the way for the first reductions in the country's benchmark lending loan prime rates (LPR) in 10 months next Tuesday, analysts said. The five-year LPR is used an as anchor rate for mortgages.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.