China’s home prices continue decline with biggest drop in nearly 9 years as easing measures fail to buoy buyer confidence

Prices of new homes fell last month in 62 of the tracked cities, versus 59 in November. Lived-in homes saw lower prices in all 70 cities in December for the first time since October 2014.

Tier-1 cities saw new-home prices fall 0.4 per cent from November, with Guangzhou and Shenzhen down 1 per cent and 0.9 per cent, respectively, while prices in Beijing stayed flat. Prices in Shanghai rose by 0.2 per cent.

Month on month, December prices fell 0.4 per cent in tier-2 cities and 0.5 per cent in tier-3 cities, steeper than their 0.3 per cent and 0.4 per cent declines, respectively, in November.

Second-hand home prices in tier-1 cities recorded a month-on-month slide of 0.1 per cent last month, versus a 0.3 per cent increase in November, with declines of 3.6 per cent and 3 per cent in Shenzhen and Guangzhou, respectively. Beijing’s lived-in home prices rose 1.7 per cent, while Shanghai’s increased 4.5 per cent.

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“National new home prices in 2023 demonstrated a trend of ‘rise first then fall’ with a widening contraction, which implies a price-for-volume strategy has been taken in multiple cities,” said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institute.

“In the past, slides in home prices were tightly regulated by the authorities in case of further impacts on the economy. But we can see some cities acquiescing or encouraging developers to offer discounts to spur sales, as it to some extent would help developers with their cash flow.”

The statistics bureau also reported on Wednesday that property investment contracted in 2023. Real estate investment in terms of value fell by 9.6 per cent to 11.09 trillion yuan (US$1.5 trillion), roughly the same decline as in 2022.

The lacklustre sales figures come after Beijing and Shanghai reduced down payment ratios for first-time homebuyers and expanded the definition of non-luxury homes to extend benefits to more buyers. Authorities in Shenzhen and Guangzhou launched similar policies late last year.

China’s top 100 developers in terms of sales reported that December transaction value dropped 34.6 per cent year on year to 451.3 billion yuan, according to China Real Estate Information Corporation. The same metric declined 29.6 per cent year on year in November.

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The sluggish performance brought full-year sales to 5.4 trillion yuan, a 16.5 per cent drop compared with 2022, even though December sales rose 15.7 per cent compared with November. Only 16 out of the 100 top developers reported sales above 100 billion yuan in 2023, four fewer than in 2022.

“National data reflected an obvious divergence in different cities,” said Zhang Bo, chief analyst at 58 Anjuke Real Estate Research Institute in Shanghai, adding that the markets in Beijing and Shanghai were relatively resilient while lower-tier cities were still under pressure.

The market expects only gradual recovery until after the Lunar New Year holiday, Zhang said.

“Second-hand home pricing is expected to continue its falling trend in the first quarter of this year, dragged by soaring listings,” he added.