Rise in New Home Prices in China

BEIJING (Reuters) – Prices of new homes in China rose slightly in September, traditionally a peak season for house hunting, according to a private survey released on Tuesday. This uptick extends months of tepid gains in a crisis-hit market that has concerned the country’s leaders.

The average price across 100 cities increased by 0.14% from the previous month’s 0.11%, as reported by property researcher China Index Academy. Year-over-year, the average price rose by 1.85%.

Out of the 100 cities surveyed, only 17 reported price increases, down from 35 in August, highlighting a cautious buyer sentiment that has dampened the real estate market in recent years.

The market has been struggling since 2021 due to a series of cash-strapped developers defaulting on loans, resulting in high inventory levels of new homes and unfinished projects.

Since then, authorities have lifted many previously imposed home purchase restrictions aimed at deterring speculation. They have also reduced mortgage rates and down payment requirements. However, these measures have had a limited impact on demand.

In a recent effort to stimulate buying, the central bank announced a monetary stimulus package that includes a reduction in the minimum down payment ratio to 15% for all types of housing.

Guangzhou became the first top-tier city to completely lift restrictions on home purchases on Sunday. Shanghai and Shenzhen have also announced plans to ease purchase restrictions on non-local buyers and lower down payment requirements for first-time home buyers.

Despite these initiatives, economist Huang Zichun from Capital Economics noted that they are unlikely to lead to a market recovery: "The key to making a real difference is to provide greater fiscal funding for the purchase of unsold homes."

The prolonged downturn has hurt household wealth, as many families consider homes their largest investment, which in turn has affected domestic consumption. To support households facing loan repayment challenges, regulators instructed banks on Sunday to lower interest rates on all existing mortgages by the end of October.