Investors are losing confidence in China’s property markets. Smaller cities are being especially hard hit by a decline in home prices. Jacky Wong reports for The Wall Street Journal:
September and October are usually the peak season for China’s property sales. But things are looking different this year—and not in a good way. Until Beijing works up the gumption to intervene more decisively to restore confidence, the slow drift downward of the market—and the broader economy—seems likely to continue.
Chinese housing prices continued to fall last month. New-home prices declined 0.3% in August from the previous month, extending the slide to a whole year, official data released Friday showed. That brought the year-over-year drop to 2.1%. Smaller cities are faring particularly badly: Prices in third-tier cities fell 3.7% from a year earlier.
Sales of new residential properties dropped 21% year over year, a smaller decline than in July, but that was partly due to a low base last August. Property sales of 22 developers tracked by Morgan Stanley fell 29% in aggregate in August.
Local governments have been rolling out measure after measure to boost the market. But such policies mostly just represent an easing of previous restrictions, making it simpler for buyers to make purchases. For example, many cities have begun allowing parents to help their children buy an apartment using their housing provident funds, a kind of compulsory saving program in China.
But such policies can only help so much when overall confidence in property developers’ finances remains fragile. The collapse of a spate of developers has raised concerns about whether they would be able deliver their presold apartments at all—and whether stronger developers’ uncompleted projects could be at risk too.
Falling prices add another reason for potential buyers to stay on the sidelines. And China’s zero-Covid policy makes matters worse by dragging on income growth and employment.
Restoring confidence requires tackling the issue of uncompleted apartments. And while the central government has so far declined to decisively intervene, local governments—whose finances have been damaged by plunging land sales—probably aren’t up to the task.
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