China’s home prices fall fastest in 9 years, but see signs of stability

China’s new home prices fell the most year-on-year in October since 2015, but a narrowing monthly rate of declines suggested the property sector was beginning to stabilise with a barrage of support from the government.

In annual terms, new home prices slid 5.9 per cent in October, in their 16th consecutive month of declines, after a 5.8 per cent drop in September.

However, month-on-month, new home prices were down 0.5 per cent in their slowest decline since March, after dipping 0.7 per cent in September, according to Reuters calculations based on National Bureau of Statistics (NBS) data.

The month-on-month fall in home prices narrowed in large, medium and small cities - tier-one, tier-two and tier-three cities, said NBS in its accompanying statement.

In a sign of a potential shift in sentiment, NBS said 75.9 per cent of respondents in its poll expect new home prices to remain stable or rise in the next six months, up 17.6 percentage points from the previous poll.

Three of the 70 cities surveyed posted growth in year-on-year home prices in October, up from two cities the previous month.

The government said the data showed policies introduced to support the property sector, which plunged into crisis in 2021, were starting to have an effect. The property market was stabilising and there were early signs that home prices were bottoming too, an NBS spokesperson, Fu Linghui, said at a news conference on Friday.

Cash flows of property developers were also improving, and the bureau was optimistic about the trend, Fu said.

Property investment fell at a faster pace from January to October but sales narrowed the slump, separate official data showed.

Analysts, however, questioned whether there would be much of a rebound in the sector.

“Property support measures do seem to be providing some relief to the housing market - new home sales picked up by the most since May last month,” Capital Economics’ China economist Zichun Huang said in a note.

But Huang added that unless moves by local governments are “followed by substantial fiscal easing next year, which seems unlikely, the boost is likely to be short-lived”.

On Wednesday, the finance ministry introduced new tax incentives to further lower the cost of home purchase and spur demand, in its latest efforts to revive the sector.

China cut benchmark lending rates by 25 basis points in October to boost demand.

Policymakers pledged to press for the timely delivery of pre-sold homes, a major concern for home buyers. A total of 2.85 million homes had been delivered nationwide as of Nov. 13, the housing regulator said earlier this week.

China’s yuan slipped against the dollar on Friday and looked set for the seventh straight weekly drop, the longest such losing streak since 2021, reflecting market worries of fewer Federal Reserve rate cuts and more US tariffs on Chinese goods.

During Donald Trump’s first presidency, the yuan weakened about 5 per cent against the dollar in the initial round of US tariffs on Chinese goods in 2018, and fell another 1.5 per cent a year later when trade tensions escalated.

As part of his pitch to boost American manufacturing during the recent election campaign, Trump said he will impose tariffs of 60 per cent or more on goods from China.

The proposed tariffs, as well as other policies such as tax cuts, are seen as inflationary and likely to keep US interest rates relatively high in a blow to currencies of trading partners.

But, losses in the yuan on Friday were limited as the central bank again set its daily yuan midpoint at levels much stronger than markets had projected, with traders and analysts interpreting it as a sign of official support to prevent the local currency from falling too fast.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2 per cent band, at 7.1992 per dollar, 490 pips firmer than a Reuters’ estimate of 7.2482.

“The PBOC’s downside bias on the daily USD/CNY fix is back,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.

The dollar/offshore yuan’s tomorrow-next swap points, a gauge that measures yuan’s funding costs via currency forwards, kept climbing this week.

Tighter yuan conditions and higher funding rates effectively discouraged investors from shorting the yuan.

The offshore yuan traded at 7.241 yuan per dollar around midday. Separately, data on Friday showed that China’s factory output growth slowed in October and demand woes in the property sector showed few signs of abating, even though consumers seemed to perk up a bit more, backing calls for more stimulus to get the economy firing on all cylinders.