China’s New Home Prices Stall in June, Adding Pressure for Stimulus

China’s new home prices remained unchanged in June, marking the weakest result of the year and putting pressure on policymakers to implement more stimulus measures as the country’s economic recovery falters. The data, released by the National Bureau of Statistics (NBS), showed that prices did not increase from the previous month, slowing down the nationwide rise seen in May. Furthermore, prices in June were also flat compared to the same period last year, reflecting a decline from the slight increase seen in May.

The property sector, which accounts for a significant portion of China’s economy, faced a sharp downturn last year as developers defaulted on debts and suspended construction on presold housing projects. In response, authorities at both the central and local levels introduced a range of policies to support the sector, including financial assistance for developers and incentives for homebuyers. However, these measures have not been sufficient to boost confidence and home demand, hampering hopes for a swift recovery.

The weakness in home prices, coupled with a decline in exports, is increasing pressure on policymakers to take further action to prop up the real estate market and stimulate demand. Analysts anticipate that additional stimulus measures will be announced following a meeting of the Communist Party’s Politburo later this month, which will set the tone for economic policies in the second half of the year.

Chen Xiao, an analyst at property data provider Zhuge House Hunter, emphasized the urgent need for stronger policies to restore confidence in the property market. He argued that small-scale measures are no longer sufficient to address the declining sentiment. To support homebuying, Chen suggested that policies should focus on boosting employment and incomes.

The NBS data showed that out of the 70 cities monitored, 31 recorded month-on-month increases in new home prices in June, a decline from the 46 cities that experienced such rises in May. Notably, prices remained flat in tier-one cities like Beijing and tier-two cities, after experiencing a rise in May. In tier-three cities, prices saw a slight decline of 0.1%.

Zou Lan, a senior official at the People’s Bank of China, highlighted the need for “marginal optimization” of property policies given the significant changes in supply and demand within the real estate market. On Friday, PBOC officials hinted at further easing of property policies, while economists from Goldman Sachs anticipate that the July Politburo meeting will emphasize the importance of stabilizing the property market.

In an effort to support the cash-strapped sector, the central bank extended some policies from a November rescue package until the end of 2024. However, the uncertain economic outlook and ongoing weakness in the sector have dampened confidence, making a quick revival unlikely. A quarterly survey conducted by the PBOC revealed that fewer households expect housing prices to fall in the third quarter compared to the previous quarter.

In conclusion, China’s new home prices remained stagnant in June, exhibiting the slowest growth of the year. With the property sector facing challenges and the country’s economic recovery faltering, policymakers are under pressure to implement additional stimulus measures to revive the market and boost demand. Stronger policies focusing on employment and income support may be necessary to restore confidence in the property market. The upcoming Politburo meeting is expected to provide further insight into the government’s plans for the sector.