New home prices in China fell at their fastest pace in more than eight years in March as the debt woes of major property developers continued to drag on demand and the economic outlook.
China's property sector, accounting for nearly a quarter of the economy, has been engulfed by a debt crisis since 2021 after a regulatory crackdown on high leverage among developers triggered a liquidity crunch, with a string of them reporting weaker financial results for 2023 last month.
New home prices in March dropped 2.2% from a year earlier, marking the biggest decline since August 2015, and worse than a 1.4% fall in February, according to Reuters calculations based on National Bureau of Statistics (NBS) data.
Prices fell 0.3% month-on-month, matching February's drop.
Chinese authorities have been ramping up measures to prop up the troubled sector, including relaxing home purchase curbs, supporting urban village renovation, and pushing banks to quicken new loan approvals to cash-strapped developers.
Analysts say many of these policies are piecemeal in nature or have only limited short-term impact, which in turn is keeping home buying sentiment in check and curbing a broader full-blown recovery.
Declines in home prices worsened year-on-year in tier-one, tier-two and tier-three cities.
The falling property data, contrasted with the faster-than-expected Chinese GDP growth in the first quarter, suggested it will continue to be a drag on the economy seeking to find a firmer footing after the COVID-19 pandemic.
"There's not much of an improvement in the outlook from here. I think there's still downside risks to the economy. It's pretty clear the property glut is still continuing," said economist Woei Chen Ho at UOB in Singapore.
Property investment and sales fell at a faster pace in March from a year earlier, according to Reuters calculations based on separate official data on Tuesday.
"We estimate the property downturn will drag GDP growth by 0.3 ppt in 2024. Property investment is expected to drop 12% this year," economists at ANZ said in a research note.
Potential buyers have also been wary of purchasing new homes because of concerns about the ability of indebted developers to deliver projects on time.
Financing support should be extended to real estate projects to ensure that homes are delivered on time, Vice Premier He Lifeng, China's economic tsar, said over the weekend.
The delivery of homes on time will help stabilise expectations, He said during an inspection tour in the central city of Zhengzhou.
But without more aggressive stimulus policy, confidence and prices may not improve as quickly as the authorities hope for.
"Absent the monster spending splurge of years gone by, real estate investment, dwelling prices and new dwelling sales are set to fall throughout 2024," Harry Murphy Cruise, economist at Moody's Analytics, said in a research note.
