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China's housing market showed modest improvement in September, with home prices in 100 cities increasing by 0.14%, though the market remains fragile. Out of the cities surveyed, only 17 reported gains, down from 35 in August, reflecting hesitant buyer sentiment. The property market has been in decline since 2021 due to developer defaults and oversupply. Authorities have responded with eased purchase restrictions, lower mortgage rates, and a stimulus package that reduces the down payment ratio to 15%. However, experts argue that more fiscal support is needed to address unsold homes and reinvigorate demand.
In September, the prices of new homes in China saw a slight increase, as revealed by a private survey on Tuesday. This month is typically a busy period for property buyers, though the housing market remains in a fragile state, raising concerns for the country's leadership. According to data from the property research firm China Index Academy, the average price in 100 cities inched up by 0.14%, a small rise compared to the 0.11% recorded in the previous month. On a year-on-year basis, prices rose by 1.85%. Advertisement
When surveyed, only 17 reported a rise in home prices, down from 35 in August, reflecting a cautious buyer sentiment that has dampened the real estate market in recent years. The market has been in decline since 2021, following several cash-strapped developers defaulting on loans, which left a surplus of new homes and unfinished projects. In response, authorities have relaxed many restrictions on home purchases that were originally put in place to discourage speculators. Mortgage rates and down payment requirements have also been reduced, though these measures have had little impact on boosting demand.
In a recent move to stimulate home buying, the central bank introduced a monetary stimulus package last week, which included reducing the minimum down payment ratio to 15% for all types of housing. On Sunday, Guangzhou, a major southern city, became the first top-tier city to completely remove all restrictions on home purchases. Meanwhile, Shanghai and Shenzhen announced plans to relax restrictions for non-local buyers and lower the minimum down payment requirement for first-time buyers.
Despite these efforts, economist Huang Zichun from Capital Economics noted in a research report last week that the measures are unlikely to trigger a significant market recovery. He suggested that the real solution lies in offering more fiscal support for purchasing unsold homes.
The prolonged market slump has also reduced household wealth, as homes are often their largest investment, leading to a decline in domestic spending. In response, regulators instructed banks on Sunday to reduce interest rates on all existing mortgages by the end of October, aiming to provide relief to households facing loan repayment challenges.
Despite ongoing efforts to stimulate the market, including easing mortgage terms, economist Huang Zichun highlights that without stronger fiscal intervention, a broad market recovery remains unlikely. Reduced household wealth and sluggish demand continue to challenge the sector.
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