China's new home prices are falling again in March as COVID dampfed the situation

China's new home prices are falling again in March as COVID dampfed the situation ...

  • New home prices unchanged month-on-month in March
  • Price growth flat on month for second time in a row
  • New home prices grew at slowest pace in six years

BEIJING, April 15 (Reuters) - China's new housing prices fell again in March compared to the previous month, according to government estimates on Friday, indicating that demand was less robust as the increasing COVID-19 lockdown measures weakened consumer confidence.

For the second time in a row, average new house prices in 70 major cities were unchanged on a month-on-month basis, according to Reuters estimates based on March data from the National Bureau of Statistics (NBS).

New home prices increased by 1.6 percent on a year-on-year basis, the lowest rate since November 2015, and decreased by 2.2 percent in February.

After a government campaign to reduce developers' high debt levels put the sector in a serious slump in the second half of 2021, more than 60 cities have reduced curbs on home purchases to support the struggling property market.

Since March, banks in over 100 Chinese cities have reduced mortgage rates by about 20 to 60 basis points, according to a central bank official.

In many towns, a spike in the cases of the highly transmitsible Omicron variant and strict virus lockdown measures have cooled demand.

Prices increased by 0.4 percent in tier-one cities during the month, down from a 0.5% increase in February, while growth in tier-two cities was zero.

"The decrease in growth in first-tier cities in March was mainly caused by the COVID epidemic, indicating lower market expectations," said analyst Xu Xiaole of Beike Research Institute.

More cities are likely to reduce property restrictions in the near future, and demand will be gradually released, according to Xu.

The property market in Shanghai's commercial district has slowed, with home prices climbing at their lowest pace in four months, at 0.3 percent month on month.

Shanghai is in the midst of China's worst outbreak since the virus was detected in Wuhan in late 2018, with more than 20,000 cases every day. Dozens of more cities are in a partial or full lockdown.

According to Lu Wenxi of Centaline, Shanghai's price growth does not imply the entire market situation.

"In April, the rise in new house prices in Shanghai will continue to fall," Lu said.

Yicai said that transactions by the value of newly built homes in Shanghai fell by 27% from a month earlier to $36.2 billion yuan ($5.68 billion) in March.

On Wednesday, China's State Council or Cabinet said additional policy measures would be needed to support the economy, but analysts are doubtful if interest rate cuts would swiftly reverse the slump as long as the government maintains its zero tolerance COVID-19 policy.

According to Nomura's client note, new property sales by volume in 30 cities surveyed by Wind fell 50.5 percent year on year in April.

($1 = 6.3739 Chinese yuan renminbi)

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