New home prices in China slumped again last month as Covid continued to have an impact on demand.
Beijing is now expected to roll out more support measures to help fire a recovery after the dismantling of pandemic curbs last month brightened the outlook for the country’s economy.
The likely pledges of more support come after new home prices dropped both in monthly and annual terms in December.
But analysts say the property sector is showing signs of recovery, though it remains uneven and more supportive policies are needed to revive sentiment in the battered market.
The sector will remain sluggish in the short term, and likely to stabilise after the second quarter of the year, said Zhang Dawei, chief analyst at property agency Centaline.
“The market needs more policies targeting improved demand, especially in tier-one cities.”
Prices in December declined 0.2% month-on-month, the fifth straight month of decline and at the same pace as in November, according to Reuters calculations based on National Bureau of Statistics (NBS) data released on Monday.
From a year earlier, prices fell for the eighth month in a row, dropping 1.5% from a 1.6% slump in November.
Prices in tier-one cities remained unchanged from a month earlier in December from a decline of 0.2% in November.
Prices in Beijing and Shanghai rose at a slightly faster pace from a month earlier while prices in Shenzhen and Guangzhou fell at a slower pace, official data showed.
In December, 55 out of 70 cities saw a month-on-month decline in new home prices, four more than in November, the NBS said in an accompanying statement.
Zero-Covid End Buoys Market
The property sector, once a key driver of the world’s second-largest economy, was severely mired last year as debt-ridden developers failed to finish stalled projects and led to mortgage boycotts by some buyers.
A flurry of property support measures for home buyers and developers in recent weeks, coupled with Beijing’s abrupt removal of its zero-Covid policy last month cheered the market.
The central bank said earlier this month that for cities where the selling prices of new homes fall for three consecutive months, the floor on mortgage rates can be lowered or abolished for first-time home buyers in phases.
According to analysts’ calculation, 38 cities are eligible for adjustable mortgage rate floors, including some second-tier cities such as Wuhan and Zhengzhou and more than 20 smaller cities.
Chinese mortgage data provider Rong360 estimates the average rate for first-time home buyers in 42 major cities in December was 4.16%, down 137 basis points from a year earlier and the lowest since it started the surveys in 2015.
To relax restrictions on borrowing for property developers, regulators will improve the “three red lines” rule for 30 pilot firms, state media Xinhua reported last week. The policy restricts the amount of new borrowing property developers can raise each year by placing caps on their debt ratios.
- Reuters with additional editing by Sean O’Meara