PROPERTY REVIEW: the property downturn deepens

The August 17 data release is clearly the dominant story this week: the attempted recovery in top-tier cities has not broadened, while investment, sales and developer financing have deteriorated further. Caixin’s reporting reinforces the divide, particularly between higher-end projects in core cities and weaker mass-market housing

China’s property downturn has deepened despite pockets of price resilience in its largest cities, with official data released this week showing investment, construction and sales deteriorating through July. The figures suggest recent local easing measures have yet to generate a nationwide recovery and leave housing as a significant drag on domestic demand at a time when broader economic growth has also slowed. 

New home prices across 70 major cities fell 0.1% in July from June and 3.2% from a year earlier, according to Reuters calculations based on National Bureau of Statistics data. Only 17 of the 70 cities recorded monthly price increases. First-tier new-home prices were unchanged, while those in second-tier cities fell 0.1% and third-tier cities declined 0.3%, showing that stronger demand in the largest urban centers has not spread down the city hierarchy.

Chinese reporting has highlighted an even sharper divide within stronger cities. Caixin said new-home price indices in Shanghai, Guangzhou and Shenzhen have now risen for five consecutive months, but the improvement has been concentrated in higher-end projects. In Guangzhou, 108 of 202 developments with comparable transactions still recorded lower average selling prices in July, despite the citywide new-home index rising.

More troubling for the economy has been the continuing retreat by developers. Property investment fell 19.2% year-on-year in the first seven months, widening from an 18.0% decline in the first half. New construction starts dropped 24.0%, while new commercial-property sales by floor area fell 11.8%. Developers’ available funding declined 20.3%, including a 32.1% fall in domestic bank lending and a 23.5% decline in mortgage funding. 

The data have strengthened the case for additional support, but Beijing has so far favored targeted local measures rather than another nationwide property stimulus. That approach may help sustain demand in wealthier cities, but July’s figures indicate it has not yet restored developers’ willingness to invest or households’ appetite to buy across the country. With retail sales growth also slowing to 0.6% in July, persistent weakness in housing remains closely tied to China’s wider difficulty in reviving household confidence and domestic spending.