China’s home prices rise for first time in 18 months as supportive measures restore some confidence
China’s home prices rose for the first time in a year and a half, as favourable government policy restored some confidence to the beleaguered market.
The average price of a new home in 70 medium and large cities in mainland China edged up 0.3 per cent in February, after staying essentially flat in January, according to data released by the National Bureau of Statistics on Thursday.
Prices in 55 of the 70 cities tracked saw a monthly increase in February – 19 more than in the previous month – while lived-in home prices rose in 40 cities versus 13 in January, the latest data showed.
“[Fifty-five] is the largest number since July 2021, which suggests a good home sales performance in February and the start of the recovery in the sector,” said Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institute.
On a year-on-year basis, 14 cities recorded an increase in new home prices while seven cities saw houses in the secondary market become more expensive in February.
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China housing: Can the world’s biggest housing market boom again?
China housing: Can the world’s biggest housing market boom again?
“We can see the property market is definitely picking up since the start of the new year, with first-tier cities rebounding faster than lower-tier cities and the lived-in home market showing more robust recovery than the new-home market,” said Xu Xiaole, chief analyst with the Beike Research Institute.
“The recovery was supported by multiple factors. For example, the favourable policies from the government, from financing the developers to lowering the cost for homebuyers, has shored up sentiment.”
The average price of a new house in China increased 4.1 per cent on an annual basis to 10,588 yuan (US$1533) per square metre in the first two months of 2023, the first rise in 11 months, according to data released by the National Bureau of Statistics of China on Wednesday.
The volume of home sales in January and February dropped 3.6 per cent from a year ago to 151.3 million square metres while their sales value fell 0.6 per cent to 1,544 billion yuan.
“The price data indicates that the overall market is starting to rebound, and we expect home transactions data in the first quarter to turn positive from negative,” said Yan.
China’s authorities and local government have been stepping up their efforts to support the country’s property market since November, after a year-long crisis in the sector. They have been offering financial help to developers on an unprecedented scale in an effort to ensure home supply and restore stability in the sector.
Since then, home sales have become a key factor in gauging the pace of recovery of the Chinese property sector and signalling a possible “turning point” in the crisis.
Though the February sales data was a positive sign for the market, it will take time for a solid rebound to emerge, Xu warned.
“We need also to mention that the recovery in January and February is partly due to pent-up demand,” he said.
“Large transaction volumes in the short term do not mean that the market will heat up at high speed.”
As an expert in real estate economics and market trends, I bring a wealth of knowledge and experience to shed light on the recent developments in China's housing market. My deep understanding of economic indicators, government policies, and market dynamics allows me to provide valuable insights into the factors influencing the observed changes.
The recent uptick in China's home prices, marking the first increase in 18 months, can be attributed to a combination of factors that have collectively contributed to restoring confidence in the beleaguered market. Government policies play a pivotal role in this positive shift, as evidenced by the supportive measures implemented to bolster the real estate sector.
The National Bureau of Statistics' data reveals a 0.3% increase in the average price of new homes across 70 medium and large cities in mainland China for February. This follows a period of relative stagnation in January. Importantly, 55 out of the 70 cities experienced a monthly increase in home prices, indicating a widespread positive trend. Additionally, the prices of lived-in homes rose in 40 cities compared to 13 in January.
Yan Yuejin, director of the E-house China Research and Development Institute, notes that this surge in the number of cities with rising home prices, the highest since July 2021, signifies a strong home sales performance in February and hints at the beginning of a recovery in the sector.
On a year-on-year basis, 14 cities recorded an increase in new home prices, and seven cities saw prices for existing homes rise in February. The recovery is not uniform across all cities, with first-tier cities rebounding faster than lower-tier cities. Xu Xiaole, chief analyst with the Beike Research Institute, emphasizes that the lived-in home market is exhibiting a more robust recovery than the new-home market.
A crucial aspect contributing to the recovery is the implementation of favorable government policies. These policies include financial assistance to developers and efforts to lower costs for homebuyers. The National Bureau of Statistics reports a 4.1% annual increase in the average price of a new house in China for the first two months of 2023, the first rise in 11 months.
However, it's essential to exercise caution in interpreting the data. While the market is showing signs of rebounding, Xu Xiaole warns that the surge in January and February may, in part, be attributed to pent-up demand. Therefore, sustained growth and a solid rebound may take time to materialize.
In conclusion, the positive trajectory of China's housing market, driven by government support and favorable policies, indicates a potential turning point after a year-long crisis. While the recent data is encouraging, continued monitoring is crucial to assess the long-term sustainability of the recovery and whether it represents a true inflection point in the market.
