China property slump deepens as home prices fall for second month
BEIJING (BLOOMBERG) – China’s home prices fell for a second month in October as a property slump deepens in the world’s second-largest economy.
New-home prices in 70 cities, excluding state-subsidised housing, slid 0.25 per cent last month from September, when they fell 0.08 per cent, National Bureau of Statistics figures showed on Monday (Nov 15).
Values in the secondary market declined 0.32 per cent, the biggest drop since February 2015.
An intensifying home market downturn is spurring more concerns about China’s economic growth, given that the sector accounts for about a quarter of gross domestic product.
Bank of America and Citigroup warned that China’s expansion for this year may miss the 8.2 per cent anticipated by economists, and that the slump could last into next year, dragging growth below 5 per cent.
Falling prices may dissuade homebuyers concerned about the value of their assets, making it harder for developers to sell properties and generate much-needed cash.
A liquidity crisis at industry giant China Evergrande Group is spreading to its competitors, which are struggling to refinance their debts, particularly in the offshore junk dollar bond market.
Speculation is mounting that regulators may ease their clampdown on leverage in the industry.
Bonds rose late last week after a series of articles published in state media signalled support measures are on the way to help developers tap debt markets. The central bank highlighted that mortgages to homeowners stabilised in September in a rare statement last week.
Still, China’s banking regulator said late on Friday that the government will continue to curb the “financialisation of real estate” and prevent bubbles in the sector. It will maintain stable prices of land and housing, the China Banking and Insurance Regulatory Commission said in a statement.
“The government would want to limit the negative impact on the economy and financial sector from a sharp property downturn,” UBS Group economists led by Dr Wang Tao wrote in a note last week. But the bank warned not to expect a wholesale property easing like the batch offered during an earlier slump in 2015-2016.
The Federal Reserve warned last week that fragility in China’s real estate sector could spread to the United States if it deteriorates dramatically.
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