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China saw a halt in the month-on-month decline of new home prices for the first time in 18 months, after a series of government stimulus measures aimed at reviving the struggling property sector. Despite this positive shift, prices on a yearly basis still dropped by 5.3%. While the central bank governor believes risks in the real estate market have been reduced, the sector continues to face significant challenges. Property investment, sales, and new construction have all seen substantial declines in 2024, highlighting the ongoing struggles faced by developers.
In December, China's new home prices stopped their month-on-month decline for the first time in 18 months, according to official data released earlier this week. This was a marked improvement from November, when home prices had dropped by 0.1%, based on calculations by Reuters using data from China's National Bureau of Statistics (NBS). However, compared to last year, new home prices were still down by 5.3%, although the decline was slightly less than the 5.7% drop seen in November. Advertisement
The slump in home sales in China has been ongoing since the property market crisis in 2021. Debt-laden developers have been struggling with repaying loans and delivering homes that have already been sold, which has eroded confidence in the sector.
To stabilize the market, the government introduced several measures in the latter half of last year. These included lowering mortgage rates and permitting local governments to purchase unsold housing units and vacant land using special bond proceeds.
China's central bank governor commented earlier this week that the risks in the property market had been significantly reduced, with this view supported by the steady price trend in December. Notably, prices in first-tier cities saw an increase during the month. Of the 70 cities surveyed by the NBS, 23 experienced an increase in home prices, a rise from the previous month's 17.
Despite these efforts, however, the fundamental issues plaguing most developers have not been resolved. The challenges have remained largely unchanged over the past three years, and the government's actions have not been able to significantly ease these problems.
In a related report, official data released earlier this week showed a continued sluggishness in property-related activities. Property investment in 2024 dropped by 10.6% compared to the previous year, marking the largest annual decline on record. In addition, property sales and new construction starts, based on floor area, also fell sharply by 12.9% and 23.0% respectively, indicating that China's real estate market will continue to face difficulties in the near future.
While December marked a slight improvement in China's property market with a halt in the month-on-month price decline, the sector still faces significant hurdles. The government's efforts to stabilise the market have brought some relief, but the underlying issues, such as developer debt and weak sales, persist. The ongoing decline in property investment and construction suggests that the road to full recovery for China's real estate sector remains uncertain and challenging.
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