China's new home prices fall for second month on weak sentiment By Reuters

By Liangping Gao and Dehui Foreign Exchange 2022 latest newsRyan Woo

BEIJING (Reuters) -China's September new home prices fell for the second straight month as mortgage boycotts, a heightened debt crisis and COVID-19 curbs weighed on homebuyers' sentiment.

China's property sector has been beset by multiple headwinds after regulators clamped down on excessive borrowing since mid-2020. Problems have deepened from the liquidity crunch, with debt-ridden developers defaulting on bond payments, homebuyers halting their mortgage payments on stalled projects and pandemic restrictions continuing to undermine demand.

Beijing has rolled out a flurry of policies to revive the sector, including relaxing mortgage rates and refunding individual income tax for some homebuyers. But demand has yet to recover, with a decline in developer sales and investment underscoring the bleak outlook.

"China's property market remains sluggish and is expected to stabilise in the fourth quarter, but still hovering at a low level," said Zhang Dawei, chief analyst at property agency Centaline.

The property market has been affected by falling confidence over the economic outlook, especially as cash-strapped developers halted construction on many projects, Zhang said.

New home prices in September fell 0.2% month-on-month after a 0.3% drop in August, according to Reuters calculations based on National Bureau of Statistics (NBS) data released on Monday.

On a year-on-year basis, new home prices in September declined at the fastest pace since August 2015, falling 1.5% after a 1.3% decline in August.

WEAK CITIES

Out of the 70 cities surveyed by NBS, 54 reported price falls in September, up from 50 cities in August.

In monthly terms, new home prices in tier-two cities fell 0.2% and declined 0.4% in tier-three cities.

"The property markets in lower-tier cities still face strong headwinds from weaker growth fundamentals than large cities, including net population outflows and potential oversupply problems," said Goldman Sachs (NYSE:) in a research note.

Separate data from the statistics bureau also showed the sector remained in a protracted slump, with developers struggling with weak demand.

Property sales by floor area in September declined for a 14th consecutive month in September, down 16.15% on year from a slump of 22.58% in August, according to Reuters calculations based on official data.

Property investment fell 12.1% from a year earlier, slightly narrowing from a 13.8% fall in August.

POLICY

China wrapped up its twice-a-decade leadership reshuffle on Sunday, with Xi Jinping securing a third term as general secretary of the ruling Communist Party and packing the new Politburo Standing Committee with allies.

China reiterated its "housing is for living, but not for speculation" in the full work report of the Communist Party Congress.

Analysts said they did not expect big policy changes after the Congress.

"There is little room to give more help to real estate property developers as doing so will risk the credibility of government reform (for property developers, that means the deleveraging reform)," said Iris Pang, chief economist for Greater China at ING.

"There could be some targeted policy to help mortgagors that bought uncompleted projects but they should not be considered preferential policies for real estate developers."

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