China’s Property Prices Plummet Amid Persistent Market Slump

New home prices across 70 major Chinese cities fell by 8% in July. The property market continues to struggle, with notable declines in three-tier cities. Government austerity measures have exacerbated the crisis, impacting developers and sales. Despite efforts by the Chinese government to stabilize the market, challenges persist.

According to data released Thursday, new home prices across 70 major Chinese cities dropped by an average of 8% in July. The property market continues to struggle, with the fall in property prices marking an ongoing slump, as reported by Nikkei Asia, referencing data from the China National Bureau of Statistics.

The peak of China's housing market was in August 2021. Government-imposed property financing restrictions at that time placed leading developers such as China's Evergrande Group in a crisis, resulting in a significant drop in housing sales. Over the past three years, three-tier cities witnessed a 10% price drop while second-tier cities, including provincial capitals, saw a 5% decrease. First-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen experienced a narrower decline. Prices of pre-owned homes fell in 67 out of 70 cities in July, further aggravating the situation, according to the Nikkei Asia report.

The Chinese government's reliance on state-owned land sales to fund expenses faces pressure due to falling house prices. Weak property demand suggests that housing prices could continue to fall, potentially dropping 40% from their peak, as parallel cases in Japan and the US indicate, said Yao Yang, an economics professor at Peking University. A significant challenge is the many development projects abandoned midway due to developers running out of cash, reported Nikkei Asia.

An International Monetary Fund (IMF) report raised concerns about China's ongoing property crisis, urging the central government to address issues with unfinished housing. It estimated that required fiscal spending to resolve these issues would amount to 5.5% of GDP over four years, roughly 7 trillion yuan (USD 979 billion) based on 2023 figures. The Chinese government responded by asserting that current policies were adequate to bring about a "positive trend" in the property market, although these measures have yet to significantly boost sales, according to Nikkei Asia. (ANI)

(With inputs from agencies.)