China’s New Home Prices Fall for the First Time in More Than Six Years

The decline, though slight, marks the first such decrease since November 2015 when China was wrestling with a pronounced slowdown. It follows a 0.66% year-over-year increase in March.

When compared with the previous month, Chinese new-home prices declined for an eighth consecutive month, falling 0.3% in April—wider than March’s 0.07% month-to-month decrease.

New-home prices rose in just 30 of the 70 cities last month, compared with the 40 cities that saw increases in March. The declines were generally concentrated in China’s smaller and poorer cities, Sheng Guoqing, an analyst at the statistics bureau, said Wednesday.

Taken together, the numbers suggest that the efforts taken so far by Chinese officials to halt the bleeding in the sector have yet to stir home buying across the country.

In recent months, dozens of cities across China have eased home-purchasing curbs, issued subsidies and lowered mortgage rates in a bid to boost buyer confidence. On Sunday, China’s central bank allowed lenders to cut mortgage rates for first-time home buyers.

However, the measures haven’t yet been sufficient to reverse the slide for an embattled property sector that, by some measures, accounts for more than a quarter of the country’s overall economic output.

“April’s decline is a strong signal,” said

Yan Yuejin,

research director of Shanghai-based E-House China R&D Institute, a research firm. “Policies to stabilize home prices and buyers’ expectations need to be issued soon. Otherwise the prices will continue to cool.”

China’s property sector began slowing last year as Beijing cracked down on housing speculation and enforced borrowing curbs on cash-strapped property developers, which pushed several prominent players to the edge of collapse.

While those moves have succeeded in reining in soaring home prices, they have also shaken a core belief among many in China that buying a home is a surefire investment.

In addition to the regulatory uncertainties, the property sector has also taken a beating from Beijing’s zero-tolerance approach to Covid-19.

Lockdowns, which began in March, have shut down Shanghai, the northeastern province of Jilin and many other parts of the country, keeping prospective home buyers from spending, suppressing sentiment and slowing construction.

As of Monday, full or partial lockdowns have been implemented in 38 Chinese cities, affecting 271 million people, according to analysts at Nomura, an investment bank.

The combined impact of regulation and Covid-19 measures has turned a once-frothy market—a year ago, central bankers were still warning of a housing bubble—into a drag on the broader economy.

The weakness in Wednesday’s numbers wasn’t entirely unexpected. Though China’s official home price data had until Wednesday shown continued year-over-year increases, property developers’ earnings reports had already revealed the extent of the pain rippling through the sector.

On Monday, China reported that new-home starts and home sales by value plunged 44% and 47%, respectively, in April from a year earlier.

Mortgage demand also plunged last month, contracting by the equivalent of $9 billion last month, China’s central bank said Friday.

Goldman Sachs

economists told clients in a note Wednesday that, despite recent attempts to prop up the market, China’s property sector isn’t out of the woods and would continue to weigh on overall growth in the coming quarters.

—Bingyan Wang contributed to this article.

Write to Jonathan Cheng at [email protected]

The decline, though slight, marks the first such decrease since November 2015 when China was wrestling with a pronounced slowdown. It follows a 0.66% year-over-year increase in March.

When compared with the previous month, Chinese new-home prices declined for an eighth consecutive month, falling 0.3% in April—wider than March’s 0.07% month-to-month decrease.

New-home prices rose in just 30 of the 70 cities last month, compared with the 40 cities that saw increases in March. The declines were generally concentrated in China’s smaller and poorer cities, Sheng Guoqing, an analyst at the statistics bureau, said Wednesday.

Taken together, the numbers suggest that the efforts taken so far by Chinese officials to halt the bleeding in the sector have yet to stir home buying across the country.

In recent months, dozens of cities across China have eased home-purchasing curbs, issued subsidies and lowered mortgage rates in a bid to boost buyer confidence. On Sunday, China’s central bank allowed lenders to cut mortgage rates for first-time home buyers.

However, the measures haven’t yet been sufficient to reverse the slide for an embattled property sector that, by some measures, accounts for more than a quarter of the country’s overall economic output.

“April’s decline is a strong signal,” said

Yan Yuejin,

research director of Shanghai-based E-House China R&D Institute, a research firm. “Policies to stabilize home prices and buyers’ expectations need to be issued soon. Otherwise the prices will continue to cool.”

China’s property sector began slowing last year as Beijing cracked down on housing speculation and enforced borrowing curbs on cash-strapped property developers, which pushed several prominent players to the edge of collapse.

While those moves have succeeded in reining in soaring home prices, they have also shaken a core belief among many in China that buying a home is a surefire investment.

In addition to the regulatory uncertainties, the property sector has also taken a beating from Beijing’s zero-tolerance approach to Covid-19.

Lockdowns, which began in March, have shut down Shanghai, the northeastern province of Jilin and many other parts of the country, keeping prospective home buyers from spending, suppressing sentiment and slowing construction.

As of Monday, full or partial lockdowns have been implemented in 38 Chinese cities, affecting 271 million people, according to analysts at Nomura, an investment bank.

The combined impact of regulation and Covid-19 measures has turned a once-frothy market—a year ago, central bankers were still warning of a housing bubble—into a drag on the broader economy.

The weakness in Wednesday’s numbers wasn’t entirely unexpected. Though China’s official home price data had until Wednesday shown continued year-over-year increases, property developers’ earnings reports had already revealed the extent of the pain rippling through the sector.

On Monday, China reported that new-home starts and home sales by value plunged 44% and 47%, respectively, in April from a year earlier.

Mortgage demand also plunged last month, contracting by the equivalent of $9 billion last month, China’s central bank said Friday.

Goldman Sachs

economists told clients in a note Wednesday that, despite recent attempts to prop up the market, China’s property sector isn’t out of the woods and would continue to weigh on overall growth in the coming quarters.

—Bingyan Wang contributed to this article.

Write to Jonathan Cheng at [email protected]