China’s home prices likely to keep dropping as investors lose confidence in economy, central bank survey finds
- Just 14.8 per cent of respondents in a consumer survey by the People’s Bank of China believe home prices could rise in the fourth quarter of this year
- ‘Developers and homeowners may have to mark down prices to get their properties sold,’ says You Liangzhou, who owns a property agency in Shanghai
The previous survey, in the second quarter, found that 16.2 per cent respondents expected home prices to climb between July and September.
Based on sales data from 21 cities, the transaction volume plunged 38 per cent from a year ago, with Hangzhou, the capital of East China’s Zhejiang province, diving 80 per cent, and Beijing’s witnessing a 60 per cent fall.
In late August, China’s central bank cut the five-year loan prime rate (LPR) by 15 basis points to 4.3 per cent, reducing borrowing costs for homebuyers.
In Shanghai, the five-year mortgage rate for first-time buyers stands at 4.65 per cent, while buyers of second homes are charged an annualised interest rate of 5.36 per cent. Both rates have been reduced by 15 basis points.
At the end of September, the Ministry of Finance announced that people who buy a new home within a year of selling their old one will get the capital gains tax on the sale refunded.
The tax incentive, aimed at bolstering transactions, could save the buyer of a flat worth 10 million yuan (US$1.39 million) as much as 500,000 yuan in tax payments.
China’s economy grew by 0.4 per cent in the second quarter, compared with a year earlier, as it struggled to shake off the impact of widespread lockdowns to contain the spread of Covid-19.
Along with the fallout from Beijing’s strict zero-Covid policies, the slowdown in the mainland’s property sector has been a major factor in banks such as Nomura, Morgan Stanley and UBS cutting the country’s growth forecasts to less than 3 per cent for 2022 – much lower than the official target of 5.5 per cent.
In August, 50 cities across the mainland saw new home prices drop, compared to 40 a month earlier, according to the National Bureau of Statistics.
The number of cities that witnessed second-hand home price drop jumped to 56, five more than July.