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China home price slump deepens as big cities boost support

SHANGHAI – China’s new home prices fell for a sixth month and values in the secondary market plunged the most in nine years, underscoring why the authorities are stepping up efforts to address the property slump.

Prices for new homes in 70 cities, excluding state-subsidised housing, fell 0.37 per cent from October, when they declined 0.38 per cent, National Bureau of Statistics figures showed on Dec 15. Prices for existing homes tumbled 0.79 per cent, the most since October 2014.

China’s prolonged housing downturn has weakened the economy and hurt developers, which are struggling to repay debts and complete projects. In the latest move to revive demand, the authorities relaxed home-buying curbs in Beijing and Shanghai, two of the country’s biggest housing markets.

“The property market slump largely continued in November as more developer defaults further dampened buyer confidence,” said China Index Holdings analyst Liu Shui. “Developers will likely resort to steeper price cuts to boost sales towards the year end.”

Other government figures released on Dec 15 showed a worsening picture for real estate. Residential property sales slid 4.3 per cent in the first 11 months, deepening from a 3.7 per cent decline a month earlier, the statistics bureau said. Property investment shrank 9.4 per cent in the year to date versus 9.3 per cent previously.

Since late August, China has rolled out fresh measures to support the property sector, adding to a slew of moves over the past year mostly aimed at stoking demand for homes.

Officials in Beijing and Shanghai cut down-payment requirements for first- and second-home buyers, according to announcements on Dec 14. The cities also changed the definition of so-called non-luxury homes, effectively allowing more residences to qualify for lower mortgage thresholds.

“The easing in Beijing and Shanghai was not entirely a surprise, given that home sales were fairly grim and credit demand was soft,” said Ms Zerlina Zeng, senior credit analyst at Creditsights Singapore, adding that there is a risk the loosening of curbs there may “crowd out demand” in lower-tier cities, where developers are more reliant on sales.

Other cities are allowing deeper discounts to attract buyers. At least two district governments in Suzhou and Huizhou have given tacit consent to developers to lower prices by more than 25 per cent from their peaks, local news outlet Yicai reported earlier this week.

Among the 70 cities, 69 saw existing home prices drop, with values unchanged only in Hangzhou, the statistics bureau said. This shows that declines in the second-hand market are “steeper than ever”, said research director Yan Yuejin of the E-house China Research and Development Institute.

The drop in values is a concern in a country where real estate accounts for about 78 per cent of household wealth – double the United States rate. Buyers also remain spooked by construction delays and developer defaults.

Industry giant Country Garden Holdings defaulted on a dollar bond for the first time in October. China Evergrande Group, the world’s most indebted developer, narrowly avoided liquidation in December when a winding-up court hearing was postponed, as it struggles to restructure borrowings.

There have been signs of stronger government support to ease developers’ funding woes. China’s vice-housing minister this week pledged to avoid a cascade of debt defaults. Since November, Bloomberg has reported that the authorities created a draft list of developers eligible for bank support and may allow lenders to offer them unsecured loans for the first time. BLOOMBERG

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