(Bloomberg) — China’s home prices fell at a slightly faster pace in August, underscoring the waning effect of the latest housing rescue plan.
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New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.73% from July, following a 0.65% decline a month earlier, National Bureau of Statistics figures showed Saturday. Values of used homes fell 0.95%, compared with a 0.8% decline a month earlier.
The figures highlight Beijing’s struggle to contain the property downturn at a time when deflationary pressures are adding to the economic gloom. Efforts to spur domestic demand have done little to revive the housing market, endangering the government’s growth target and spurring economists to call for additional stimulus.
The prolonged slump in property values has deterred homebuyers from forking out money as they wait for further price declines.
“There is still substantial pressure for new-home prices to keep falling,” said Chen Wenjing, research director at China Index Holdings. “In the busy coming autumn season, only a few big cities are likely to see homebuying activities pick up.”
Policymakers have taken steps to ramp up homebuyer demand this year, including reducing mortgage borrowing costs and easing restrictions on purchases. Yet signs of a sales recovery in June proved to be short-lived as property buyers anticipated prices of new homes to drop further.
The glacial pace of rescue measures on the ground is adding to the pain. Beijing’s campaign to buy unsold homes to ease oversupply has seen slow implementation, driven in large part by the unattractive economics of the plan for local governments.
“Home sales have stayed weaker than expected” despite government support, said Raymond Cheng, head of China property research at CGS International Securities Hong Kong. “If the issue is not solved, property prices and transaction volume contraction will continue.”
Shares of Chinese developers have slid further into a bear market, with a Bloomberg Intelligence gauge dropping more than 40% from a mid-May high.
China is poised to cut interest rates on more than $5 trillion of outstanding mortgages as early as this month, people familiar with the matter told Bloomberg this week, as the government accelerates a move to spur consumption.
The move, however, will have “minimal” direct impact on the property market even if it helps household income and consumption, according to Cheng at CGS.
–With assistance from Tian Ying.
(Updates with chart and analyst’s comment and background from paragraph four.)
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