China’s home prices decline in July as property crisis worsens

Prices of new homes in China fell 0.2 per cent month on month in July, after staying unchanged in June

Sluggish home sales and Country Garden’s liquidity crisis could spill over to other industries and lead to contagion risks, Natixis senior economist Gary Ng says

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New home prices in China dropped by 0.2 per cent on a monthly basis. Photo: EPA-EFE

Published: 4:47pm, 16 Aug 2023

More cities in China reported a decrease in home prices in July, dragging overall prices lower by 0.2 per cent month on month, as a deepening debt crisis weighs on the property sector.

Of the 70 cities tracked by the National Bureau of Statistics (NBS), only 20 cities registered an increase in new home prices last month, compared with 31 in June, while prices of second-hand homes rose in only six cities. In June, prices were flat.

“At present, the real estate market is in an adjustment stage, and some real estate companies have encountered certain difficulties in their operations,” said NBS spokesman Fu Linghui. “In particular, the debt risks of some leading real estate companies have been exposed, which has affected market expectations.”

The turmoil in China’s property sector is worsening by the day. Overall investment in real estate development in the first seven months of the year fell 8.5 per cent year on year to 6.77 trillion yuan (US$943.5 billion), according to NBS data. New home sales declined 19 per cent year on year in July, the same as a month earlier, according to US investment bank Jefferies. Distressed developers like Country Garden Holdings and China Vanke were hit harder, reporting 60 per cent and 35 per cent year-on-year slumps in sales last month.

Analysts at JPMorgan said that China’s residential property market could see a sharper-than-expected contraction this year. The US investment bank expects the value of new home sales to contract 10 per cent this year, compared with a previous estimate for a 4 per cent decline, Reuters reported on Tuesday.

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