Distress in China’s property market was highlighted by recent data revealing that new home prices in December experienced their steepest monthly decline since February 2015.
According to figures from the National Bureau of Statistics and interpreted by the South China Morning Post, prices of new homes in 70 large and medium-sized Chinese cities fell 0.4% month-on-month in December, following a 0.3% month-over-month drop in November.
Over the year, prices in the 70 cities fell by 0.9%. Real estate investment also saw a significant decline of 9.6% in 2023, amounting to 11.09 trillion yuan ($1.5 trillion), similar to the previous year’s decline.
Among the larger cities, new home prices fell by 1% in Guangzhou and 0.9% in Shenzhen, while remaining flat in Beijing. However, prices in Shanghai saw a marginal increase of 0.2%.
In tier-two cities, prices for new homes experienced a 0.4% month-on-month drop, up from November’s 0.3% fall.
Previously-owned homes in tier-one cities also registered a decline of 0.1%, after a 0.3% increase in November, with significant declines in Shenzhen and Guangzhou, offset by increases in Beijing and Shanghai.
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Property Shares Fall
Amid the property slump, shares of top developers experienced significant declines. U.S.-listed shares in China Resources Land Ltd CRBJF are down approximately 5% so far in 2024, while Longfor Group Holdings ADR LGFRY have slumped 28.5%.
In response, the Hang Seng index in Hong Kong concluded Wednesday’s session 3.7% lower, and the Shanghai Composite lost 2.1%. Longfor’s Hang Seng-listed shares were 6.8% lower, while China Resources Land was down 4.3%.
The iShares MSCI China ETF MCHI, which tracks China’s biggest stocks, fell 3% on Wednesday and was down 10% in January.
Falling Demand, Falling Population
A significant contributor to the falling prices is the lack of demand. Data published earlier this month by the China Index Academy demonstrated a notable 26% decline in average daily home sales during the last week in December, compared to the same period a year ago.
Furthermore, China’s aging population, combined with a growing death rate in 2023 due to the sudden lifting of all COVID-19 restrictions in late 2022, has led to a second consecutive year of population decline in 2023.
This trend marks the country’s first population decline in 60 years, which will undoubtedly have ongoing repercussions in the property sector. Despite government efforts to support the market through first-time buyer subsidies and tax relief on certain homes, China’s diminishing workforce is poised to impact the property sector for years to come.
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