China’s property market set an unwelcome record last month. The price of used homes in the country’s big cities fell 6.3% in February, the worst monthly drop since the government began releasing data in 2011. This was part of a widespread drop in prices across the country and shows that the China’s painful housing crisis has shown no sign of losing steam.
The years-long housing downturn has caused enormous damage to the economy, reducing business for construction companies and other companies that thrived during the housing boom. Beijing then took steps to address industry fears, including pressuring banks to lend more to struggling companies and making it easier for people to buy homes. But the latest decline could encourage the government to go further, said Zhaopeng Xing, senior China strategist at ANZ.
“This could pave the way for a move to remove purchasing restrictions completely,” he said.
The drop in used home prices comes as sales are rising, showing that homeowners now accept the need to lower prices to close deals. The number of used homes sold in eight major cities increased by 96 percent in February compared with the same month last year, according to a report by the Shanghai E-House Real Estate Research Institute. Sales volume was the highest in 20 months, the report says.
“If price reductions are needed to enable transactions, it indicates that market sentiment is still quite pessimistic, making it difficult to support a sustained recovery in transactions,” said Li Yujia, chief researcher at the Guangdong Housing Policy Research Center.
