China new home prices drop at fastest rate in nearly a decade

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Official data shows that new-home prices in China fell at the fastest rate in years last month, Reuters reports.

They dropped 0.7% in May from the previous month, Reuters calculated from data released by China’s National Bureau of Statistics.

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It was 11th straight month-on-month decline, and the steepest drop since October 2014, Reuters said, despite government efforts to cut oversupply and support debt-laden developers.

The May figure was down 3.9% from a year earlier, Reuters said.

China’s property sector has been a main engine of its economic growth, but a crisis began to spiral in 2021 when government restrictions exposed unsustainable debts held by the biggest developers like Country Garden, Evergrande, and Vanke.

They were left unable to finish housing developments with pre-sold apartments, sparking mortgage boycotts among angry buyers.

Authorities have moved to prop the sector up with a $41bn support package, but analysts doubt it’s enough to absorb the massive oversupply of homes and shrinking demand.

“The latest policies have boosted the second-hand home market in major cities, but the liquidity problem of real estate enterprises has not yet been eased and the confidence crisis in the new-home market has not yet been resolved,” said Xu Tianchen, senior economist at the Economist Intelligence Unit, told Reuters.