China's Housing Market Declines Despite Government Efforts

China’s housing market saw a sharper decline in home prices in February, marking the first deterioration in six months despite the government’s recent efforts to stabilize the sector. New home prices in 70 cities, excluding state-subsidized housing, fell by 0.14% from January, reversing the previous month’s decline of 0.07%, according to data from the National Bureau of Statistics. Meanwhile, prices of used homes dropped 0.34%, maintaining the same rate as the prior month.

The worsening price trend undermines hopes that the property market has hit its lowest point, even as some sales indicators show signs of recovery. Policymakers are grappling with the ongoing downturn, exacerbated by deflationary pressures and a trade war that continue to cloud the economic outlook.

Lu Ting, Chief China Economist at Nomura Holdings, cautioned in a report on March 10 that the collapse in the property market is not yet over. “The data suggests the property sector is losing momentum,” Lu stated, underscoring the challenges that still lie ahead.

A particularly concerning sign came from top-tier cities, where used-home prices dropped by 0.1% from January, marking the first decline since the government implemented a major stimulus package last September. The used-home market is often considered a bellwether for broader market trends because it is less influenced by local government intervention. Notably, sales of secondhand homes have outpaced new home sales in recent months.

Despite these challenges, residential sales showed a modest improvement, dipping only 0.4% in the first two months of the year compared to the same period in 2024, a significant recovery from last year’s steep 17.5% drop. Retail sales and industrial production also exceeded economists’ expectations.

However, some experts remain cautious about the sustainability of China’s recovery. Zichun Huang, a China economist at Capital Economics, warned that the country’s economic revival could be short-lived due to deep-rooted structural issues. “After a brief recovery, home sales began to decline again early this year,” Huang noted.

On a year-over-year basis, the decline in home prices eased slightly. New home prices fell 5.22% in February, a smaller drop compared to January’s 5.43%, while existing home prices fell by 7.53%, an improvement over the previous month’s 7.8% decline.

In response to the ongoing challenges, China’s government has reiterated its commitment to stimulating property consumption. New guidelines issued on Sunday call for policies aimed at boosting household spending and restoring confidence in the housing market.

Raymond Cheng, head of property research at CGS International Securities Hong Kong, believes the repeated focus on property consumption demand will accelerate policy implementation and eventually help restore buyer confidence, stimulating property sales.

During the national parliament meeting earlier this month, China’s leaders unveiled additional measures to support the property market, including empowering local governments with more control over how unsold homes are purchased to clear excess inventory. Policymakers are also considering removing price caps for local authorities in these transactions, which could make the process more attractive to both developers and state buyers.

UOB Kay Hian analysts, Jieqi Liu and Damon Shen, pointed out that these moves set a positive policy tone, with greater autonomy for local governments being a key feature. They expect the market to stabilize further in March.

As part of ongoing efforts to boost home sales, Shenzhen, a major tech hub in southern China, announced a relaxation of its housing provident fund loan policies, making it easier for buyers to access financing.

At the same time, Beijing emphasized the importance of preventing debt defaults by real estate companies, signaling a shift in focus to support a broader range of developers, not just the top-tier ones.