China’s new home-price declines moderated slightly in February, reflecting that increased policy support measures is failing to stabilise the sector.
A Bloomberg report cited data from the National Bureau of Statistics that indicated, new-home prices in 70 cities, excluding state-subsidised housing, dipped by 0.36 per cent last month.
This highlights a marginal improvement from the 0.37 per cent decline recorded in January.
Similarly, the second-hand market witnessed a narrowing of price drops to 0.62 per cent from 0.68 per cent.
These developments suggest a gradual easing of the downward pressure on home prices, albeit amid ongoing challenges.
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The significance of arresting the slump in property values cannot be overstated, as plummeting sales exacerbate liquidity concerns for developers, hindering their ability to meet debt obligations.
The liquidity crunch has intensified, with major developers like China Vanke Co. facing heightened default risks.
Against this backdrop, Chinese authorities have intensified efforts to strengthen the housing market by encouraging banks to extend financing to developers and granting local governments flexibility in implementing homebuyer-friendly policies.
Despite these interventions, new-home sales plummeted by a staggering 60 per cent last month compared to a year earlier.
Acknowledging the severity of the situation, China’s housing minister noted the critical task of stabilising the market, particularly in addressing capital-related issues.
Concerns over developers’ financial health have escalated, with companies like Country Garden Holdings Co. facing liquidation petitions and China Evergrande Group grappling with winding up orders.
Policymakers have exerted pressure on banks to ramp up property loans through “white lists” to facilitate project completion amid developer struggles.
By the end of February, state-owned lenders had approved over 200 billion yuan ($28 billion) of bank loans for eligible property projects, signalling an intensified effort to buoy the sector.
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Amid the evolving landscape, homebuyers have increasingly turned to the second-hand market, attracted by falling prices and uncertainties surrounding the delivery timelines of new properties.
This shift has led to existing home sales surpassing new properties by area for the first time last year, indicating changing consumer preferences amidst market dynamics. While these developments offer some respite, analysts caution that sustained recovery hinges on robust policy interventions.
With the central government granting local officials greater autonomy, there are expectations for more adjustments to rules and regulations to stabilise the housing market.
Some tier-2 cities have already taken steps to ease home-buying restrictions, fuelling optimism for broader policy reforms across larger urban centres.