The housing market in China experienced a lackluster performance in June, as new home prices remained unchanged, marking the weakest result of the year. This data, released by the National Bureau of Statistics (NBS), highlights the need for policymakers to consider additional stimulus measures amidst a faltering economic recovery.
According to Reuters calculations based on NBS data, prices remained flat compared to the previous month, with nationwide increases slowing down. This figure falls short of May’s marginal 0.1% gain. Furthermore, prices showed no change compared to the same period last year, reversing the 0.1% increase seen in May.
The real estate sector, which accounts for a significant portion of China’s economy, faced a severe downturn last year as developers grappled with debt defaults and halted construction of pre-sold housing projects. The challenges in the sector have persisted despite the introduction of various policies by the central and local governments and regulators over the past year aimed at providing financial assistance to developers and offering incentives to homebuyers.
However, the uncertain economic outlook and ongoing weaknesses in the sector have dampened confidence, hindering hopes for a swift recovery. The combination of sluggish home prices and declining exports is mounting pressure on policymakers to take further action to bolster the real estate market and stimulate demand.
Market expectations suggest that additional stimulus measures may be announced around the upcoming meeting of the ruling Communist Party’s Politburo later this month. This meeting will set the tone for economic policies in the second half of the year. Analysts believe that strong policies are needed to restore confidence in the property market, with small-scale measures no longer seen as sufficient. To support home buying, measures such as employment and income boosts must be strengthened.
Among the 70 cities monitored by the NBS, only 31 recorded month-on-month increases in new home prices in June, compared to 46 in May. Tier-one cities, including Beijing, and tier-two cities experienced price stability after seeing a rise in May. However, prices in tier-three cities declined by 0.1%.
Zou Lan, a senior official at the People’s Bank of China (PBOC), acknowledged the need for “marginal optimization” of property policies, considering the profound changes in supply and demand in the real estate market. This statement aligns with hints from PBOC officials suggesting further easing of property policies.
Goldman Sachs economists highlighted the expectation of the July Politburo meeting to stress the importance of stabilizing the property market. They also noted that the central bank extended certain policies until the end of 2024 as part of a rescue package announced in November. However, the uncertain economic outlook and sectoral weaknesses continue to dampen confidence, hindering a rapid revival.
A quarterly survey conducted by the PBOC revealed that 16.5% of households anticipate a decline in housing prices in the third quarter, a slight increase from the previous quarter’s 14.4% figure.
In conclusion, China’s housing market witnessed a lackluster performance in June, with new home prices remaining unchanged. The sluggishness in the market and declining exports are pressuring policymakers to consider additional stimulus measures to bolster the real estate sector and stimulate demand. Market expectations point to the upcoming Politburo meeting as a potential platform for announcing further measures. Restoring confidence in the property market and addressing the profound changes in supply and demand are crucial for achieving a more robust recovery. The uncertain economic outlook and sectoral weaknesses continue to dampen confidence, underscoring the need for concerted efforts to stabilize the housing market and support long-term growth in the real estate sector.
