Resale home prices drop at faster pace in China, private survey shows

China's resale home prices accelerated their decline in June, falling 0.75% month-over-month and 7.26% year-over-year, according to a private survey by China Index Academy. This persistent weakness, also reflected in slowing new home price growth, underscores the ongoing severe stress in the nation's property sector, highlighting the ineffectiveness of recent policy support measures amid weak consumer confidence and oversupply. The data suggests a challenging recovery path, with Goldman Sachs projecting new home demand significantly below historical peaks.

Analysis

Data from a private survey by China Index Academy indicates a significant deterioration in China's property market in June, defying government support measures. Resale home prices accelerated their decline, falling 0.75% month-over-month compared to a 0.71% drop in May, and posted a 7.26% year-over-year slump. This persistent weakness is echoed in the new homes segment, where price growth decelerated to 0.19% from 0.30% in the prior month. The data underscores that policy interventions, including interest rate cuts and homebuyer incentives, have been largely ineffective against the headwinds of weak consumer confidence and significant oversupply. The crisis, ongoing since a 2021 regulatory crackdown on developer leverage, shows no signs of abating. A Goldman Sachs research note further quantifies the structural challenge, forecasting annual new home demand to be less than 5 million units, a stark contraction from the 20 million unit peak in 2017, suggesting the market requires more substantial policy efforts to achieve stabilization.

Key Decisions for Investors

• Investors with exposure to China's real estate sector, and related industries such as banking and construction materials, should maintain a defensive posture given the accelerating price declines and failure of current policy measures.
• Closely monitor for more aggressive and systemic policy interventions from Beijing, as the report explicitly states that market stabilization requires further government action.
• Re-calibrate long-term return expectations for the sector, as forecasts of a structural-demand collapse to less than a quarter of peak levels suggest a protracted recovery is more likely than a V-shaped rebound.
• Consider underweighting assets tied to Chinese consumer sentiment until tangible evidence of its recovery emerges, as it remains a primary impediment to a housing market turnaround.