China’s housing market experienced a sharp decline in May, with prices falling at the fastest rate in nearly a decade. This downturn, driven by an excess supply of homes, has dampened demand and resulted in the steepest decrease in new home prices since October 2014 and the largest drop in existing property values since China adopted its current data collection method in 2011. This downturn comes despite the government’s most concerted effort to revive the market. In May, the People’s Bank of China eliminated the minimum interest rate and lowered down payment requirements for homebuyers, while also establishing a 300 billion yuan (£32.8 billion) facility to aid regional state-owned businesses in purchasing homes. However, investors remain doubtful about the effectiveness of these measures. The implementation of policies allowing local governments to purchase surplus real estate from developers has been slow, further contributing to market uncertainty. The overabundance of homes, leading to lower prices, is making people hesitant to invest. Additionally, prices have also fallen year-on-year, with Reuters reporting a 3.9% decline in new home prices. Liu Aihua, an NBS spokesperson, acknowledged the market’s adjustment phase at a media briefing on Monday, stating that it will take time for policy measures to take effect. Policymakers have been struggling to manage the excess supply of homes while supporting developers burdened by mounting debt, a situation that began with the pandemic-induced market collapse in 2020 and intensified with regulatory crackdowns on heavily indebted lenders. China’s struggling real estate market mirrors broader economic challenges. May’s industrial output growth slowed to 5.6%, down from 6.7% in the same month last year. While retail sales exceeded forecasts, rising 3.7% in May, the overall economic picture remains uncertain.
