(Bloomberg) -- China’s home-price declines abated for a second month in October, aided by the country’s recent policy support.
New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.51% from September, the slowest pace since March, National Bureau of Statistics figures showed Friday. Values of used homes fell 0.48%, the least in more than a year.
China in the past two months unleashed its strongest package of policies to boost the property market, including cutting borrowing costs on existing mortgages, relaxing buying curbs in big cities, and lowering taxes on home purchases. A yearslong property crash has wiped out billions of dollars in household wealth, adding to deflationary pressures.
“Tier-1 cities appear to be bottoming out, but broader property recovery is conditional on an improving economic outlook,” said Duncan Wrigley, chief China economist with Pantheon Macroeconomics.
Price movements compared with a year earlier showed a more mixed picture. New-home prices fell 6.2%, slightly more than September’s 6.1% drop, the statistics bureau said. Existing-home prices dropped 8.9%, compared with 9% in September.
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China’s economic growth would suffer a hit of as much as two percentage points should President-elect Donald Trump follow through on his campaign vow to raise tariffs on Chinese goods to 60%, economists at Standard Chartered Plc and Macquarie Group Ltd. project. Last month, President Xi Jinping reiterated the need to achieve the government’s growth goal of about 5%.
Since late September, China ramped up efforts to revive growth with pledges to support fiscal spending and stabilize the beleaguered property sector. Top leaders vowed to stem the decline of the real estate market, which Morgan Stanley branded as the country’s most determined pledge since the industry downtrend started more than three years ago.
Soon after, the trading hub of Guangzhou became the first tier-1 city to remove all restrictions on buying residential property. Beijing, Shanghai and Shenzhen allowed more people to purchase residences in suburban areas, while letting some others buy more homes. The central bank also greenlit the refinancing of as much as $5.3 trillion of existing mortgages for millions of families.
In October, regulators pledged to nearly double the loan quota for unfinished residential projects to 4 trillion yuan. It also planned to renovate 1 million homes in older, rundown dwellings in large cities.
But these announcements underwhelmed due to a lack of concrete numbers for special bonds to enable local governments to digest some 60 million unsold units.
“The question is how sustainable the housing recovery can be,” Macquarie economists led by Larry Hu wrote in a recent note. “In the past three years, the sector has had a few false dawns. Each time the housing market initially rebounded on policy easing, but weakened soon.”
(Updates with year-on-year declines in the fifth paragraph)
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