BEIJING: China’s new home prices extended their decline in January, as official data painted a familiar picture of a property sector unable to shake off a years-long downturn, maintaining pressure on cash-strapped developers and the broader economy.
Investors have been watching for signs of bottoming out in the market, but demand has remained soft despite a raft of policy measures since the industry plunged into crisis in 2021.
“The foundations of the property market’s recovery remain fragile,” said Zhang Dawei, an analyst at Centaline Property.
Prices for new homes fell 0.4% month-on-month, matching the previous month’s decline, according to Reuters calculations based on data released by the National Bureau of Statistics on Friday.
On an annual basis, prices dropped 3.1% in January, quickening from a 2.7% fall in the previous month for the steepest decline in seven months.
The prolonged downturn in the property sector, once a key engine of economic growth, has weighed on household wealth as home values have fallen. That has crimped consumption, effectively enfeebling a key engine of growth in the world’s second-biggest economy.
Policymakers have prioritised reviving consumer spending as they seek to curb industrial overcapacity and cushion China against external trade risks.
A rebound in home-buying would also help property developers, many of which need new cash flow to repay debt and finance construction to deliver presold projects.
Centaline Property‘s Zhang said that “problems such as heavy inventories in third-tier cities and weak demand have yet to be fundamentally resolved, and a full improvement in market expectations will take time.”
In the near term, the pace of month-on-month declines is likely to slow as support measures continue to take effect, he said, but added that smaller cities will need time to work through inventories and unlock demand, keeping prices under pressure.
Beijing has rolled out a raft of measures since the 2021 crisis rippled across the economy, including easing purchase restrictions and cutting down-payment requirements.
State-owned companies are also buying foreclosed property projects, in a sign that long-promised government efforts to reduce massive oversupply are finally getting traction.
But the sector is yet to stage a recovery.
Of the 70 cities surveyed by the NBS, 62 posted price declines, up from 58 in the previous month.
The resale market remained weak. Month-on-month declines eased slightly, but year-on-year falls accelerated, with prices down 7.6% in tier-one cities and more than 6% in smaller cities.
State media reported in late January that authorities had removed the so-called “three red lines” – caps on developers’ debt-to-cash, debt-to-assets and debt-to-equity ratios that lenders used when extending new loans.
Introduced in 2020, the policy helped trigger a liquidity squeeze across the sector, with many builders defaulting and running short of cash to complete presold homes.
Even without the caps, funding strains persist as developers move away from the high-leverage model that powered the boom, analysts say.
China’s primary property sales are set to fall 10% to 14% in 2026, as an oversupplied market continues to push down prices, S&P Global Ratings said in a research note this week.
“In our view, only the government could address oversupply in the property sector, given the scale of this problem. We have yet to see signs that it is keen to intervene.”
