New home prices in China’s largest cities fall for first time since 2015

Price declines could represent another challenge for nation’s real estate industry in liquidity crisis

The price of a new home in China’s largest cities fell for the first time since 2015

Prices for new homes in China’s largest cities fell month-over-month in September for the first time since 2015.

Prices declined in half of 70 cities surveyed by the National Bureau of Statistics, according to the Financial Times.

Beijing saw no change in pricing, while Shanghai saw a 0.2 percent increase. Many of the cities where prices fell are in the country’s south and central regions.

Goldman Sachs calculated a 0.5 percent decline in pricing on an annualized basis with a seasonal adjustment, though prices were still up 3.8 percent over September 2020.

There has also been a decline in sales — Bloomberg figured that home purchases fell 17 percent in September year-over-year and 20 percent in August.

Instability in the China’s real estate industry and fears of a housing bubble prompted government intervention on both ends of the housing pipeline toward the end of the last year. That effort continues into this year.

Actions included imposing restrictions on debt to both developers and homebuyers in January.
Chinese developers have around $5.24 trillion worth of outstanding debt, according to Reuters.

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Evergrande Group alone has around $300 billion in liabilities, making it the world’s most indebted developer.

The growth of new home prices slowed in the second half of 2020 and the first half of this year, but did not reverse entirely. 

A slowdown in homebuying could squeeze the country’s developers, which generally sell new properties before they are built via prepayments.

Many are already hurting — the real estate industry saw its first contraction since the start of the pandemic in the third quarter as output fell 1.6 percent year-over-year.

“In the first half of this year, many people still believed these property curbs would be temporary,” said Ting Lu, chief China economist at Tokyo-based finance firm Nomura. “As the Chinese government showed more and more determination in these property curbs, first and foremost Chinese households’ expectations of home prices changed.

[FT] — Dennis Lynch