China’s home market shows sign of thawing as prices slowed their declines in December with easier loans and policy support

Prices of new homes in 70 cities dropped 0.28 per cent in December from November, a gentler decline compared with the 0.33 per cent monthly drop in November

Easier loans bolstered property prices to a 2-per cent growth in December, compared with a year ago

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An aerial view of the snow-covered frozen fields and village houses in northeast China’s Heilongjiang province on Feb. 26, 2012. Photo: CNS

Published: 1:33pm, 15 Jan 2022

The prices of China’s newly built homes declined at a slower rate in December, offering a bit of relief to dozens of property developers that are struggling with a cash crunch and mounting debt.

The average price of new homes across 70 cities fell by 0.28 per cent in December from a month earlier, a slower rate than the 0.33 per cent monthly drop in November, according to calculations by E-house China R&D Institute in Shanghai, based on data released on Saturday by the National Bureau of Statistics.

China’s monetary authorities cut the reserves that banks had to set aside by 0.5 percentage point in early December to release 1.2 trillion yuan (US$189 billion) into the banking system, followed two weeks later by a cut in the prime rate for one-year loans. With the additional liquidity, local authorities took their feet off the brakes on property purchases, allowing buyers to re-enter the market to soak up the unsold homes that litter the country.

That bolstered new home prices by 2 per cent in December, compared with a year ago, indicating that “the constant pessimism has been slightly curbed, as [looser] credit policies started to play a positive role,” said E-house’s research director Yan Yuejin, adding that growth may return in the second quarter. November’s prices rose 2.4 per cent from the same month in 2020.

A residential area in Beijing, on10 January 2022. Photo: EPA-EFE

The slowing decline in home prices raises hope that a bottom is in sight for a government-led clampdown that began in the summer of 2016 in an industry that contributes to at least 15 per cent of the country’s economy.