The ongoing crisis plaguing China's once-booming housing sector is not showing signs of relenting, as the latest government data show that home prices in May fell even faster than the month before.
New-home prices in 70 Chinese cities—excluding state-subsidized housing—fell by 0.71 percent in May compared to April, according to figures from China's National Bureau of Statistics reported by Bloomberg and released on Monday. It's the deepest drop since October 2014, another time when the Chinese housing market was facing a dramatic downturn amid cooling prices and sales.
Some 10 years ago, the housing sector—historically a major driver of investment in the country bolstering the country's economy—threatened China's growth after decades of explosive business. Now, the property sector crisis, which began in 2020, is weighing heavily on the country's difficult recovery from the COVID-19 pandemic and threatening to destabilize the domestic and global markets.
The Chinese housing market is estimated to account for as much as 30 percent of the country's economic activity.
According to the latest data, the value of existing homes also plunged by 1 percent in May—the biggest drop since at least 2011, when China started using the current method of collecting information. Compared to a year earlier, new-home prices dropped by 4.3 percent, while existing-home value plunged by an even deeper 7.5 percent.
The numbers seem to signal that Beijing's recent move to rescue its struggling property sector is yet to make a significant change and turn things into a more positive direction.
The Chinese leadership has tried to address the current slump with a sweeping rescue package last month which included relaxing mortgage rules and asking local governments across the country to buy unsold homes from developers navigating troubled waters and turn them into affordable social housing.
In order to support the local government in such a potentially expensive operation, the People's Bank of China announced that it will provide 300 billion yuan—the equivalent of $41.5 billion—in loans through a nationwide program.
But the recovery process has been slow and oversupply in the country's market has continued to drag prices lower. Beijing officials reportedly signaled earlier this month that, if the rescue package fails to produce results, they might move to reduce inventory.
Bloomberg wrote that China's State Council urged its officials to keep an "open mind" over formulating new policies to reduce supply and stabilize the market. "We should steadily and concretely push forward the work of digesting and revitalising existing homes and land with an open mind and broadened thinking," the cabinet said.
About the writer
Giulia Carbonaro is a Newsweek reporter based in London, U.K. Her focus is on the U.S. economy, housing market, property ... Read more