China home prices fall for 10th month as crisis deepens
New home prices in 70 cities, excluding state-subsidized housing, slipped 0.1% from May, when they sank 0.17%, National Bureau of Statistics figures showed Friday.
Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.
Chinese’s property prices fell for a 10th month in June, underscoring how government relief efforts are failing to curb the country’s spiraling real estate crisis.
New home prices in 70 cities, excluding state-subsidized housing, slipped 0.1% from May, when they sank 0.17%, National Bureau of Statistics figures showed Friday. Home sales fell from a year earlier, although the pace of declines eased.
China’s $2.4 trillion real estate market is showing little sign of a recovery, adding to woes for an economy that barely expanded last quarter. Contagion is spreading to the financial system amid reports that a rapidly growing number of homebuyers are refusing to pay mortgages for unfinished apartments. That’s alarmed investors, sinking property bonds and Chinese bank shares.
Residential sales dropped 23% in June, easing from a 42% drop in May as many cities emerged from Covid restrictions. From a month earlier, sales surged 69%, according to Bloomberg calculations based on official figures.
But the outlook for further improvements is dimming amid the mortgage boycott and another flare-up in coronavirus cases. Sales have now fallen for 12 straight months, the longest slump since China created a private property market in the late 1990s.
Authorities held emergency meetings with banks this week to grasp the impact of the home-loan snub, people familiar with the matter said. Buyers of at least 100 projects in more than 50 cities have stopped payments due to construction delays and concerns about falling prices.
China’s banks have detailed 2.11 billion yuan ($312 million) of loans at risk to the increasing number of homebuyers refusing to pay mortgages. In most cases, the overdue amount makes up less than 1% of the lender’s total mortgage portfolio. Still, GF Securities Co. expects that as much as 2 trillion yuan of mortgages could be impacted.
The crisis engulfing Chinese builders is reaching a new phase, with a debt selloff expanding to firms once deemed safe from the cash crunch, including Country Garden Holdings Co., the largest builder by sales.
Chinese authorities have been easing home ownership rules and urging banks to lend more to support the property sector, which accounts for about a quarter of the economy by some estimates. Gross domestic product grew just 0.4% in the second quarter, official figures showed Friday, meaning Beijing will likely miss its goal of about 5.5% growth for the full year.
