China's new home prices stagnate in June, economic recovery falters

July 15, 2023 (MLN): China's new home prices were unchanged in June, the weakest result this year, data showed on Saturday, increasing pressure on policymakers for more stimulus as economic recovery falters, Reuters reported.

The flat result from a month earlier, with rises slowing nationwide, was below May's 0.1% gain, according to Reuters calculations based on National Bureau of Statistics (NBS) data. Prices were also unchanged from a year earlier, retreating from a 0.1% increase in May.

The property sector, accounting for one-fourth of activity in the world's second-biggest economy, slumped sharply last year as developers defaulted on debts and suspended construction of presold housing projects.

The central and local governments and regulators have announced a slew of policies over the past year to prop up the sector.

Measures have ranged from extended financial support for developers to multi-pronged incentives for home buyers. But the uncertain economic outlook and persistent weakness in the sector have dented confidence and home demand, dampening hopes for any quick revival.

Weakness in home prices and falling exports are adding to pressure on policymakers to take do more to prop up real estate and revive sluggish demand.

Markets widely expect more stimulus around a meeting of the ruling Communist Party's Politburo late this month, setting the tone for economic policies in the second half of the year.

"The property market is in dire need of strong policies to boost confidence as small-scale policies can no longer rescue the dwindling sentiment," said analyst Chen Xiao at property data provider Zhuge House Hunter.

"Policies such as boosting employment and incomes must strengthen to support home buying," he added.

Thirty-one of the 70 cities monitored by NBS recorded month-on-month rises in new home prices, down from 46 in May. Prices were flat after rising in May in tier-one cities including Beijing and tier-two cities. They fell 0.1% in tier-three cities.

There is room for "marginal optimization" of property policies considering profound changes in supply and demand in the real estate market, Zou Lan, a senior official at the People's Bank of China (PBOC), said on Friday.

"PBOC officials hinted at further property policy easing in the press conference on Friday, and we expect the July Politburo meeting to emphasize the need to stabilize the property market," Goldman Sachs economists wrote in a research note.

The central bank on Monday extended until the end of 2024 some policies in a November rescue package for the cash-strapped sector.

However, the uncertain economic outlook and weakness in the sector have dented confidence, dampening hopes of any quick revival.

A quarterly PBOC survey showed 16.5% of households believe housing prices will fall in the third quarter, down from the previous quarter, when 14.4% of households expected a decline.

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