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According to official data released earlier this month, China experienced the most rapid increase in new home prices in March. This is a positive indication of the market slowly recovering from it slump with the help of various supportive policies introduced by the government in the last year to tackle the crisis. However, the extent of this upward trend’s momentum remains uncertain.
The National Bureau of Statistics (NBS) reported that new home prices rose by 0.5% month-on-month in March, following a 0.3% increase in February. This marks the highest rate of growth since June 2021 and the third consecutive monthly increase.
In March, there was a decrease of 0.8% in home prices compared to the same month of the previous year, which is the least significant drop seen since June 2022. This follows a 1.2% decline in February and marks the 11th consecutive month of annual declines.
Last year, China’s property sector, which accounts for around 25% of the country’s economy, was severely impacted by the regulatory crackdown on developers’ high levels of debt. This resulted in a financing crisis that halted the construction of several housing projects. Additionally, some buyers chose to boycott mortgage repayments, which further weakened consumer sentiment, particularly given the challenges posed by COVID restrictions. However, in recent weeks, major cities have witnessed a revival in home sales as pent-up demand has been released following the easing of COVID restrictions in December.
According to the National Bureau of Statistics, out of the 70 cities surveyed, 64 cities recorded an increase in new home prices on a monthly basis. This is the highest number of cities to report such an increase since May 2019 and an increase from 55 cities in February. The rise in house prices was widespread across all city tiers, with all cities experiencing an increase in month-on-month gains.
However, analysts caution that it is too early to predict whether this recent growth in the property market will be sustained, given the uncertainty surrounding consumer confidence. They note that any recovery in the property market will likely be gradual, given the challenging demographic trends, as well as the still-tight financing conditions.
This rise in demand can also be attributed to government policies, such as Beijing’s push to restart delayed building projects and Zhengzhou’s implementation of a 10-billion-yuan fund to aid developers in resuming construction. As a result, some developers, such as Country Garden Holdings, have shifted towards providing construction services, which may yield lower revenue but a more consistent workflow.
According to a report by analysts from China Real Estate Information Corp, while the housing market has shown signs of improvement due to stimulus policies and the lifting of Covid restrictions, there are concerns about its sustainability. Some smaller cities are already seeing a slowdown in sales momentum. Furthermore, the analysts warn that if developers increase housing prices later in the year, buyer interest may decrease.
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