China home prices fell more steeply in September, adding to doubts over whether Beijing’s steps to prop up the property market are enough to revive the sector.
New-home prices in 70 cities, excluding state-subsidized housing, declined 0.3% last month from August, when they slipped 0.29%, National Bureau of Statistics figures showed Thursday. Prices slid 0.48% in the secondary market.
Chinese developers are grappling with a prolonged slump that’s starved them of cash, delayed completion of apartments and deprived the economy of a key growth driver. Home sales and property investment remained a drag on economic output last quarter, underscoring why policymakers have taken steps recently to rekindle demand.
The real estate crisis marked another grim milestone this week when Country Garden Holdings Co., once the nation’s biggest builder, signaled it was likely to default on a dollar bond for the first time.
Falling prices are a deterrent to homebuyers in a country where property has long been one of the main stores of wealth. Sentiment is also worsening among investors, with a Bloomberg Intelligence index of Chinese developer shares falling to a 14-year low on Wednesday.
The government allowed major cities to cut down payments for homebuyers in September in one of the most significant moves to stimulate the housing market. Several other measures, such as relaxing the floor for mortgage rates on first-home purchases, have also taken effect.
There are some signs that the steps are having a positive effect. Outstanding medium- and long-term loans to the household sector, a proxy for mortgage lending, increased by 543 billion yuan ($74 billion) in September from the previous month, the most since March.
But lukewarm home sales during a recent key vacation season stirred concerns about whether the existing support is enough to spark a recovery.
“Looking ahead, the main risk still comes from the property sector, which is not out of the woods yet,” said Larry Hu, head of China economics at Macquarie Group Ltd.
