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Chinese home prices fall by largest amount in history

Chinese home prices fall by largest amount in history

The state of the Chinese economy has been a hot – and arguably a confusing – topic in 2024. 

Already in January, the country’s stock markets entered the bloodiest phase of the already-bloody few years, forcing an intervention to help stabilize the situation.

In the same months, the People’s Republic saw its largest property developer go bankrupt, highlighting that the woes go beyond stocks and extend to the embattled real estate market – a market that has been pressured for years in the wake of a government crackdown on excessive borrowing.

China’s housing market sees largest price drop on record

The figures, published in mid-May, only further solidified the notion that the housing market in China is ailing as home prices dropped 10% since the start of the year and more than 3% in April – overall constituting the biggest drop in the country’s history.

China new and used housing prices chart. Source: National Bureau of Statistics

The price decline can be interpreted in multiple ways given that it is, on the one hand, in line with China’s stated goals as President Xi went on record on multiple occasions saying that ‘housing is for living in and not for speculation.’ In 2021, Vice Premier Han Zheng added that the sector should not be used as a short-term economic stimulus.

On the other hand, the decline appears to have been interpreted as too costly given that – in addition to its efforts to help the stock market – the government of China also announced a stimulus package aimed at boosting the property sector.

A major part of this drive is set to come in the form of lowering minimum down payments for first-time home buyers to 15% and second-time buyers to 25%, as well as cutting rates for home loans by 0.25%.

The real estate market figures come shortly after China published a broader – and mixed – economic report for April.

April figures show mixed results for the Chinese economy

Industrial production in the country skyrocketed by 6.7% – beating both the forecasts set at 5.5% and March growth of 4.5%.

The growth of retail spending, however, slowed significantly from March’s 3.1% and the predicted 3.8% and came in at just 2.3% for April. This is the lowest growth seen in the country since December of 2022.

At the same time, the People’s Republic is readying a new sale of long-term government bonds intended to raise funds for crucial projects and has offloaded a significant amount of U.S. debt – likely with the aim of bolstering diversification, though the exact goals remain unclear at the time of publication.

Relatively high degrees of economic uncertainty in China throughout recent months can also be tracked by the increasing demand for gold recorded in the People’s Republic – though, admittedly, a similar trend has been recorded throughout the world as a set of concerning factors has created something of a perfect storm and drove the price of the commodity to record highs.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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