China‘s housing market is in turmoil, with home prices dropping even further in May, according to the latest government data.
In 70 Chinese cities, excluding state-subsidized housing, new-home prices fell by 0.71% in May compared to April, marking the steepest decline since October 2014. This downturn comes after a decade where the housing sector played a vital role in China’s economy.
The ongoing crisis, which started in 2020, is now hindering the country’s recovery from the COVID-19 pandemic and poses risks to both domestic and global markets, given that the housing market contributes to about 30% of China’s economic activity.
The value of existing homes also took a hit, with a 1% decrease in May, the largest drop since at least 2011. New-home prices dropped 4.3% compared to the previous year, while existing-home values plummeted even further at 7.5%.
China’s recent efforts to revive the market include a rescue package enacted last month that relaxed mortgage rules and encouraged local governments to convert unsold homes into affordable housing. The People’s Bank of China also pledged 300 billion yuan ($41.5 billion) in loans to support these initiatives.
Despite these measures, the market continues to face challenges, with oversupply driving prices down. Beijing officials have hinted at further actions if the existing rescue package fails to yield positive results, potentially focusing on reducing inventory.
The State Council of China has advised officials to explore new strategies to stabilize the market. The government emphasized the need to creatively tackle the supply issue and revitalize existing properties and land to address the ongoing crisis.