(Bloomberg) -- China’s residential real estate slump deepened again in July despite the country’s most forceful efforts yet to support the property market.
The value of new-home sales from the 100 biggest real estate companies slumped 19.7% from a year earlier to about 279 billion yuan ($38.6 billion), faster than the 17% decline in June, according to preliminary data from China Real Estate Information Corp. Transactions dropped 36.4% from June, after showing a notable increase in April and May.
The accelerating slide underscores how China’s recent rescue package is falling short of expectations. Bloomberg Economics estimates that the central bank’s $42 billion relending program can only help local governments purchase 0.8% of China’s 60 billion unsold homes. Buyer sentiment has also been hurt since a twice-a-decade meeting of the ruling Communist Party failed to roll out more forceful support.
Multiple Chinese cities have removed price guidance curbs recently to better reflect market demands. On Wednesday, Zhengzhou city in central China’s Henan province scraped use of guide prices for new homes, allowing developers to set their own transaction prices for houses. Others including Shenyang, Lanzhou and Ningde also removed such guidances earlier this year, according to local media Yicai.
The real estate sector continues to drag down China’s economic growth, which is expected to undershoot the government’s official 5% target this year, according to Bloomberg Economics estimates. A Bloomberg gauge of Chinese developer shares have declined 21% this year.
Meanwhile, it’s taking longer to clear housing inventory. The average period for a sample of 50 cities to destock homes increased by 3.9 months to 21.3 months as of the end of May, local media Jiemian reported, citing data from China Index Academy.
In June, two credit ratings firms lowered their forecasts for China’s property market. S&P Global Ratings expects residential sales to drop 15% this year, more than the 5% decline it projected earlier. Fitch Ratings cut its annual sales estimate to a decrease of 15%-20%, worse than an earlier estimate of a 5%-10% drop.
Cash-strapped developers, many in default for more than a year, are counting on sales to persuade debt holders they’ll be repaid and to fight off liquidation.
--With assistance from Sarah Chen and Twinnie Siu.
(Updates with details on some Chinese cities removing price guidance)
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