China’s new home prices fell at a slower pace in June, fueling hopes that the battered real estate market is stabilizing.
New home prices in 70 cities, excluding state-subsidized housing, dropped 0.15% from May when they slid 0.2%, figures from the National Bureau of Statistics showed on Wednesday. The improvements didn’t extend to values of second-hand homes, which fell 0.32%, the most in four months.
A real estate recovery would help to underpin the world’s second-largest economy, which is losing momentum even as exports jump. Household confidence has been dented by the years-long residential slump, hampering policymakers’ efforts to boost domestic consumption.
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“In the second half of this year, we may see a trough in long-term cycles of China’s property market,” Citic Securities Co. analysts including Chen Cong wrote in a recent report. “Following Shanghai, more and more cities may start to see their residential values stop declining.”
A total of 20 cities saw gains in new home values, the most in more than a year.
That’s partly because more housing projects offered by developers have become cheap enough to attract buyers who had previously been seeking bargains in the second-hand market, said Yan Yuejin, vice president of Shanghai E-house China Real Estate Research Institute.
Some lower-tier cities saw prices rebound. Values climbed 0.4% both in Xuzhou in eastern Jiangsu province and Huizhou in southern Guangdong province. The two tier-3 cities used to have a lot of speculative homebuying that led to bubbles, and may have seen prices drop back to “reasonable levels,” Yan said.
Still, the improvement in new home prices hasn’t revived spending in the sector. Property investment tumbled 18% in the first half of the year, the worst reading since data started in 1992. That dragged China’s economic growth last quarter to the weakest in more than three years.
In used homes, signs of a recovery have largely been confined to big cities and pockets of the market such as old apartments in good locations. Tier-2 and tier-3 cities both saw bigger declines in existing home values last month.
UBS Group AG real estate analyst John Lam, a market veteran who spotted problems at China Evergrande Group before his peers, predicts that prices in rich cities will stabilise on the back of artificial intelligence, which is lifting the fortunes of China’s biggest companies. – Bloomberg