Property Prices in China’s ‘Big Four’ Cities Show Nascent Signs of Recovery

23 Oct 2023

The Chinese government’s recent measures to revive the slumping property market have met with mixed results, as housing prices in the nation’s four megacities showed signs of stabilizing in September, while those in second- and third-tier cities tumbled further.

New-home prices in the first-tier cities — Beijing, Shanghai, Guangzhou and Shenzhen — as a group remained unchanged in September compared with the previous month, when the prices dropped 0.2% month-on-month, the National Bureau of Statistics (NBS) said on Thursday.

Prices of preowned homes in these four cities edged up 0.2% month-on-month in September, marking the first increase in five months, according to the bureau.

But in second- and third-tier cities, prices of new and preowned homes extended declines in September and fell between 0.3% and 0.5% on a month-on-month basis, according to an NBS survey of housing prices in 70 midsize and large cities.

The modest relief in the housing markets of first-tier cities came after the government rolled out a flurry of measures in the past few months to encourage homebuying and lift sentiment in the languishing property market.

Nationwide, financial regulators in late August reduced minimum down payment ratios and allowed banks to cut rates on existing mortgages. Around the same time, the four first-tier cities eased rules to allow more homebuyers to qualify for lower mortgage rates and down payments.

Guangzhou also removed curbs on buying houses in some districts.

But the housing markets in second- and third-tier cities showed no sign of rebounding in September, according to NBS data, although more of them scrapped all purchasing curbs, with some even doling out subsidies for buying homes.

Out of the 70 cities surveyed by the NBS, 45 saw new-home prices fall year-on-year last month, and 67 saw prices of preowned homes decline, NBS data showed.

China’s property market plunged into a liquidity crisis in 2021 after the central government launched a deleveraging campaign targeting overindebted developers. The policy contributed to a slump in home sales and prices fell as confidence sagged.

Small cities have been bearing the brunt of the slump. It would take third- and fourth-tier cities 24 months to sell out their new-home inventories, judging from their actual sales from April to September, according to a report by the EJ Real Estate R&D Institute, a Chinese property industry think tank.

The period would be shorter, at around 14 months, for the four first-tier cities, and around 18 months for second-tier cities. EJ’s sample includes 32 second-tier cities, and 64 third- and fourth-tier cities.

It takes some time for the policies to make a difference, because the real estate market is still in “a phase of adjustment,” Sheng Laiyun, a deputy director of the NBS, said in a press conference on Wednesday.