Prices of new homes in 70 medium and large cities fell 0.7 per cent month on month in May, the steepest since declining 0.8 per cent in October 2014, according to data published by the National Bureau of Statistics on Monday. On a year-on-year basis, prices slumped 4.3 per cent.
On the primary market, prices fell in 68 of the 70 cities surveyed by the government, versus 64 in April, the data showed. On the secondary market, prices fell in all 70 cities, versus 69 in April.
The disappointing data comes a fortnight after Beijing announced ambitious plans to rescue the sector, including a 300 billion yuan (US$41.3 billion) relending facility to help local governments buy unsold homes from distressed developers to clear excess housing inventory and shore up the market.
This was followed by mainland China’s three biggest cities – Shanghai, Shenzhen and Guangzhou – lowering their mortgage rates and relaxing home buying restrictions to pull buyers back into the market.
“The data shows prices are down almost everywhere, which shows destocking pressure for local governments is still there,” said Yan Yuejin, a director at the Shanghai-based E-house China Research and Development Institute. “Having said that, the drop in prices also implies developers have adjusted their strategies and are offering attractive discounts to lure buyers.
“Still, it is important to manage buyers’ expectations on prices and prevent the wait-and-see sentiment from spreading.”
Existing home prices in tier-one cities fell 1.2 per cent month on month in May, according to data from the statistics bureau, with the four biggest cities Shanghai, Beijing, Shenzhen and Guangzhou showing declines of 1 per cent to 1.6 per cent.
Secondary home prices in tier-two and tier-three cities fell 1 per cent and 0.9 per cent, respectively.
Meanwhile, new home sales have yet to show a big turnaround. Transacted sales generated by the mainland’s top 100 developers in May rose 3.4 per cent month on month to 322.4 billion yuan, but they were still 33.6 per cent lower from a year earlier, according to China Real Estate Information Corporation.
“Overall, the market remains depressed,” said Guan Rongxue, a senior analyst at Zhuge Real Estate Data Research Centre in Shanghai. “The effect of the supportive policies seem just a flash in the pan as the market confidence remains weak.”
Prices in June, which is usually the promotion season for developers, may lack upwards momentum as the discount trend is expected to continue, she added. “In the long run, a recovery in the property market still depends on a turnaround in employment and income expectations.”