China’s Property Market Faces Continued Challenges as Home Prices Decline
China’s property market faces ongoing declines in February, with new home prices, investment, and sales all showing significant decreases despite government stimulus efforts. Prices have dropped 0.1% month-on-month and 4.8% year-on-year. Structural issues such as demographic changes and unsold inventories hinder recovery. Analysts predict a slow stabilization, potentially finding a trough by 2025, highlighting the need for broader economic recovery and selective development strategies.
In February, China’s property market continued to suffer declines, as the recently released data indicated falls in new home prices, investment, and sales. The National Bureau of Statistics reported a 0.1 percent decrease in new home prices compared to the previous month following two months of stabilization. Year-on-year, prices declined by 4.8 percent, slightly improved from the 5.0 percent drop in the previous month. Analysts mentioned that local governments’ informal price controls may distort the actual market picture.
The decline also extended to resale home prices in tier-one, tier-two, and tier-three cities, reflecting an ongoing downturn both monthly and annually. “February’s data showed that it would be wise not to take their foot off the pedal in terms of policy support,” stated Lynn Song, chief economist for Greater China at ING. Furthermore, she expressed expectations for a price stabilization around 2025, anticipating an L-shaped recovery rather than a more rapid U- or V-shaped one.
The Chinese government has made it a priority to stabilize the property market by implementing specific policies aimed at easing home-buying restrictions and encouraging demand for enhanced housing options. These strategies target potential homebuyers looking for first homes or upgrades, aiming to reignite market activity.
Nevertheless, persistent structural challenges, including demographic shifts, stagnant incomes, and an oversupply of unsold properties, continue to weigh heavily on market sentiment. The origins of the current crisis date back to 2021 when a clampdown on developer debt led to a liquidity crisis, resulting in incomplete construction projects and a wary buyer base. The property sector, once a cornerstone of the economy, has faced increasing pressure from weak consumer confidence and U.S. trade tariffs.
Centaline property analyst Zhang Dawei emphasized that recovery is closely linked to broader economic stability. Recent data revealed significant declines in property investment and sales, down 9.8 percent and 5.1 percent year-on-year, respectively. Noteworthy was the staggering 29.6 percent drop in new construction starts compared to 23.0 percent in 2024, indicating a challenging road ahead for stabilization in property investment.
Analysts suggest that not only should prices find a bottom but also that inventories must normalize before developers consider new investments. “This process will likely be rather uneven, as developers will likely be more selective in where to build,” noted Lynn Song.
In summary, the ongoing slump in China’s property market reflects continued declines in new home prices, investment, and sales, with signs of a prolonged recovery undermined by various structural issues. The government’s initiatives for market stabilization face challenges, while recovery hinges on broader economic stability. With significant drops in new construction starts and the potential for uneven development in the future, the situation remains precarious.
Original Source: www.business-standard.com
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