China’s housing prices in 70 cities continued to decline in May, with new and used home prices falling by -0.7% m/m and -1.0% m/m respectively, both seeing the largest sequential monthly decline in the current session. Since the peak, new home prices have fallen by -6.4% and the secondary market has fallen by -12.3%.
Among the sample of 70 cities, only two cities (Shanghai and Taiwan) saw an increase in new home prices in May, while none of them saw an increase in the secondary market. This was significantly worse compared to April, when six cities saw increases in new home prices and one city saw an increase in secondary market prices. Year-to-date, two cities have seen new home prices rise, and none have seen their secondary market prices rise. 16 and 48 cities in the sample saw declines of more than 3% in primary and secondary markets, respectively. New home sales have remained in contraction by -27.9% year-on-year since the beginning of the year.
Real estate investment fell to -10.1% year-on-year in the first five months of the year, down from -9.8% year-on-year in the first four months of the year. Once again, this was weaker than market expectations, even as economists became more pessimistic about this indicator. New home starts are down -24.2% year over year since the beginning of the year, a slightly smaller decline than previously.
This data was certainly on the disappointing side and may ring some alarm bells, as May’s policy support package has not yet translated into a slower decline in housing prices, let alone stabilization. This data also indicates that the real estate sector will remain a drag on growth this year. However, we caution against overreacting, and it is still worth waiting for a few months of data as some lag is expected.