By Liangping Gao and Kevin Yao

BEIJING (Reuters)

China’s new home prices fell at the fastest pace in over nine years in August, according to official data released on Saturday. Supportive measures have yet to spur a meaningful recovery in the property sector.

New home prices declined 5.3% from a year earlier, the steepest drop since May 2015, compared to a 4.9% decline in July, based on calculations from the National Bureau of Statistics (NBS).

On a monthly basis, new home prices fell for the fourteenth consecutive month, down 0.7%, matching July’s dip.

The property market is grappling with heavily indebted developers, incomplete apartments, and declining buyer confidence. This is straining the financial system and jeopardizing the 5% economic growth target for the year.

A Reuters poll forecasts that China’s home prices will drop by 8.5% in 2024 and 3.9% in 2025 as the sector tries to stabilize.

According to Zhang Dawei, chief analyst at property agency Centaline, China’s property market is gradually bottoming out, as the demand, income, and confidence of homebuyers take time to recover. He stated, “The market is looking forward to a stronger policy.”

Property investment fell 10.2% and home sales slumped 18.0% year-on-year in the first eight months of the year, according to the data released on Saturday.

Chinese policymakers have ramped up efforts to support the sector with measures like reducing mortgage rates and lowering home buying costs, which have somewhat revitalized demand in major cities. However, smaller cities with fewer purchase restrictions and high unsold inventory are particularly vulnerable, illustrating the challenges faced by authorities in balancing supply and demand.

Among the 70 cities surveyed by NBS, only two reported gains in home prices both monthly and annually in August.

Nomura noted in a research report that, given the worsening growth slowdown due to new headwinds in the second half of the year, Beijing may ultimately need to act as the last resort builder, directly funding delayed residential projects that have already been sold.

According to Bloomberg News, China might cut interest rates on over $5 trillion in outstanding mortgages as early as this month. To support these mortgage rate cuts, a reduction in the five-year Loan Prime Rate is anticipated for September, along with a 20bp cut to the medium-term lending facility (MLF) and a 50bp cut to the reserve requirement ratio (RRR), according to economists at ANZ in a report released on Friday.