China home sales falter amid dented buyer confidence, raising threat of more developer liquidity struggles
- June sales plunged 28.1 per cent year on year among the 100 largest developers, according to CRIC
- The poor results in a normally strong month have erased gains from earlier in the year, according to China Index Academy
Grim figures for home sales in June in China show that the sector remains in crisis and will continue to weigh on the country’s economy as developers suffer amid a lack of buyer confidence.
Sales in June fell 28.1 per cent among the 100 largest developers by sales, compared to the same month last year when Covid restrictions were widely in place, according to CRIC, one of China’s largest real estate brokers. Sales rose 8.5 per cent month on month – the lowest recorded growth in what is normally a buoyant month.
Looking at just the top 25 developers selected by CGS-CIMB Securities, the news is even worse, as June sales fell 38 per cent year on year, said the firm’s managing director Raymond Cheng, citing CRIC’s data.
“We think further sales declines since April will lead to more liquidity issues for the sector and hurt China’s economic recovery as well as job creation,” he said. “Typically, developers report double-digit growth of 10 to 20 per cent year on year or month on month for June, before the liquidity issues started.”
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Looking at the first half of 2023, home sales by the 100 largest developers grew only 0.1 per cent compared with the same period last year, according to data from China Index Academy (CIA), one of the country’s largest independent real estate research firms.
In fact hopes of a recovery have petered out as growth of 12.8 per cent across the first four months declined to 8.4 per cent across the first five months before plunging to essentially no growth across the first six months, according to the CIA data.
“Since the second quarter, the property market has been cooling obviously, and homebuying sentiment remains weak,” the firm said.
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Home sales plunged 38 per cent month on month in April, then rebounded 9 per cent in May, data from China’s National Bureau of Statistics showed. The bureau is expected to release June data on July 17.
“Property sales in April-May are running ahead of our annual forecast of a small decline, but there’s a risk that current weakness persists or deepens further,” said Wang Tao, head of Asia economics and chief China economist at UBS Investment Bank.
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Throughout the year, China’s property sales are likely to drop as much as 5 per cent to 12 trillion yuan (US$1.65 trillion) to 13 trillion yuan, S&P Global estimated in early June.
Lower-tier cities, where sales are likely to drop 10 per cent this year, will “drag down national property sales in 2023”, its report said.
