China saw its steepest decline in new home prices in nine years in 2023, despite numerous efforts by Beijing to shock-start the economically-critical sector back into life.
New home prices in December logged their steepest drop since February 2015, while property sales measured by floor area fell 23% in December from a year earlier, data from the National Bureau of Statistics (NBS) showed on Wednesday.
At the same time, property investment by developers in December fell year-on-year at the fastest clip since at least 2000, according to calculations based on NBS data.
Overall for 2023, property investment dropped 9.6%, roughly the same as the slide in 2022.
The sustained downturn in the sector that accounts for around a quarter of China’s economy could drag on the country’s broader recovery and heap pressure on policymakers to roll out fresh support.
“The success of 2024 will largely be driven by how effective officials are in turning the property market around,” Moody’s Analytics said in a note on Wednesday.
Authorities have already tried propping up the sector with measures including increasing the central bank’s pledged supplementary lending (PSL) facility in December to help fund property and infrastructure projects.
In addition, Beijing and Shanghai relaxed their home purchase restrictions in mid-December, including by lowering the minimum down payment ratio for first and second homes.
However, these measures have failed to boost home buying sentiment that has slumped since 2021.
“Continued policy relaxation of the commercial housing sector and further support for affordable housing are key to engineering a property soft landing,” economists at HSBC said in a research note on Wednesday.
Analysts polled by Reuters expecting the central bank to cut the one-year loan prime rate (LPR), the benchmark lending rate, by 10 basis points (bps) in the first quarter.
Of the 70 cities in the NBS home price data, 62 reported a fall in prices in monthly terms, up from 59 in November.
Home prices in December declined at the fastest pace in nine months, down 0.4% year-on-year after a 0.2% fall in November.
For the home resale market, prices among 70 cities all fell year-on-year for the seventh straight month in tier-one, tier-two and tier-three cities.
Several Chinese developers, including China Evergrande Group and Country Garden, have defaulted on their offshore debt and entered into restructuring processes.
Country Garden, the country’s largest private property developer, warned this week that it expects the property market to remain weak in 2024.
- Reuters with additional editing by Sean O’Meara