China home prices extend decline as September recovery remains uneven

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China home prices decline

Highlights

China's new home prices fell 0.1% month-on-month in September, unchanged from August, while annual prices dropped 2.8% after a 3.0% August decline.
Late September policy caps mortgage subsidy eligibility at 1.5 million yuan homes, limiting its impact in expensive tier-one cities where prices far exceed this threshold.
Property investment and home sales contracted faster in the first nine months of 2023, signaling ongoing sector weakness despite policy support and local easing measures.

September price data and policy support

As reported by Reuters, China's new home prices fell 0.1% month on month in September, matching the pace of decline recorded in August, based on calculations using data released by the National Bureau of Statistics.

On an annual basis, new home prices dropped 2.8%, an improvement from the 3.0% decline seen in August, but still extending a downturn that has continued since June 2023. The figures suggest recent support measures are not yet strong enough to revive housing demand across the market.

In late September, the central bank and the financial regulator unveil policies to subsidise mortgage interest payments for eligible homebuyers in smaller cities. The policy caps the purchase price of eligible homes at 1.5 million yuan, a level that is far below the cost of even a one-bedroom apartment in a tier-one city.

Impact on demand and regional market conditions

China's prolonged property slump remains one of the country's biggest economic challenges, weighing on consumer confidence and reducing local government revenues. Falling home values also continue to restrain domestic demand, as many households choose to save rather than spend.

In the country's biggest cities, prices for new and resale homes continue to show signs of stabilisation, likely supported by Shanghai's further easing of homebuying restrictions and subsidy measures announced in August. Smaller cities, however, continue to record month-on-month and year-on-year declines in both new and resale home prices.

Separate data also show that property investment and home sales both contract at a faster pace in the first nine months of the year, underlining the broader weakness still affecting the real estate sector.

In our earlier article on fresh late-September stimulus measures and China’s Q3 growth outlook, we noted that economists expected only a modest pickup in GDP as weak consumption and ongoing property-market stress continued to drag on domestic demand. We also highlighted that targeted rate cuts and mortgage subsidies were part of the support package, but the broader recovery remained constrained by subdued confidence and local-government financing pressures.

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