China’s Home Prices Expected to Fall Faster

By Liangping Gao and Ryan Woo
BEIJING (Reuters) – China’s home prices will fall at a faster pace than previously forecast this year and next, a Reuters poll showed, as support policies from Beijing struggle to help the property sector find a bottom.

The poll indicated home prices would decline by 8.5% in 2024, an increase from the 5.0% decline forecast in May. Prices are expected to dip 3.9% in 2025, unchanged from earlier forecasts.

Ma Hong, a senior analyst at GDDCE Research Institution, stated, “The actual source of funding for property developers has shrunk more seriously, affecting the release of housing demand.”

He revised his house price forecasts downward due to mounting cash flow pressures on major real estate companies, which widen risk exposure and dampen confidence in the property market.

Since 2021, a prolonged property crisis has led to unsold apartments inventory bloating, crippling developers’ cash flow, affecting home prices, consumer confidence, and economic activity.

In response, Chinese policymakers have intensified support efforts, including reducing mortgage rates and lowering home buying costs. A recent poll of 10 analysts from Aug. 26-29 predicted property sales likely shrinking by 16.0% in 2024, an increase from the prior forecast of 10.0%. Investment is also expected to fall by 10.3% from a previously forecasted 10.0% decline.

Wang Xingping, a senior analyst at Fitch Bohua, noted that “the uncertainty of the economic environment adversely impacts homebuying decisions. Despite the continuous rollout of supportive policies, they are not strong enough to reverse the downward trend.”

In July, Chinese leaders vowed to continue supporting unfinished projects and convert unsold apartments into affordable housing to bolster the market. However, Beijing’s efforts are progressing slowly, with only 4% of a 300 billion yuan ($42.30 billion) relending scheme being utilized, according to central bank data.

UBS Investment Bank has lowered its GDP growth forecasts for 2024 and 2025 to 4.6% and 4%, respectively, due to a deeper-than-expected property downturn. The bank expects more supportive measures for the remainder of 2024, including faster fiscal spending and more government bond issuance.

($1 = 7.0914 Chinese yuan)