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 increment extends a trend of modest gains in a crisis-hit market that has concerned the country’s leaders.

The average price across 100 cities edged up by 0.14%, compared to a previous 0.11% gain. Year-over-year, the average price increased by 1.85%.

Out of 100 cities surveyed, 17 reported price increases, a decline from 35 in August. This highlights cautious buyer sentiment that has contributed to a cooling real estate market in recent years.

The market has struggled since 2021, with many cash-strapped developers defaulting on loans, leading to a large inventory of unsold and unfinished homes.

In response, authorities have recently lifted several home purchase restrictions aimed at curbing speculation and have lowered mortgage rates and down payment requirements. However, these measures have had limited success in boosting demand.

To further stimulate buying, the central bank introduced a monetary stimulus package, cutting the minimum down payment ratio to 15% for all housing categories.

The city of Guangzhou has become the first top-tier city to remove all restrictions on home purchases, while Shanghai and Shenzhen plan to ease purchase limits for non-local buyers and reduce down payments for first-time homeowners.

Despite these efforts, economist Huang Zichun from Capital Economics expressed skepticism about a market turnaround, pointing out that substantial fiscal funding for unsold homes is crucial.

The ongoing downturn has diminished household wealth, as homes are often their biggest investment, consequently reducing domestic consumption.

To assist households struggling with mortgage payments, regulators have ordered banks to lower interest rates on existing mortgages by the end of October.