China Real Estate Investment Fell 12% in July as Home Sales Slide Continues

China’s cash-strapped developers cut back further on real estate investment in July as new construction starts fell at the fastest pace in almost a decade and home sales worsened despite the lifting of COVID lockdowns and a slew of stimulus measures.

Figures released by the National Bureau of Statistics (NBS) on Monday showed that total investment in the property industry fell 6.4 percent year-on-year in the first seven months of 2022 — the biggest drop since March 2020.

In July property investment fell 12.3 percent, compared to the same month a year ago, to RMB 1.1 trillion ($163 billion), according to Mingtiandi calculations based on NBS data.

The housing slump was also reflected in the kickoff of new projects with new construction starts slumping 45.4 percent in terms of floor area in July and dropped to 96.44 million square metres (1 billion square feet), the largest drop since January-February 2013.

Housing Sales Continue to Slide

Developers are slowing their investments and holding back on new projects as sales of non-subsidised housing fell 28.2 percent year-on-year from January through July to total just RMB 969 billion, despite scores of mainland cities having relaxed home purchase restrictions in recent weeks.

That drop marked an acceleration from the 20.8 percent sales decline reported a month earlier, suggesting that recent policy moves have yet to win the hearts and minds of Chinese homebuyers beleaguered by delayed housing projects and developer bankruptcies.

With debt-laden developers delaying projects in a scramble to hoard cash, some frustrated Chinese homebuyers launched widely publicised ‘mortgage boycotts’ in July in an effort to force developers to deliver on stalled housing.

Intentional mass mortgage default by homebuyers at a delayed Evergrande project in Jiangxi province’s Jingde town became contagious last month with data from China Real Estate Information Corporation (CRIC) showing that, as of 19 July, buyers of 230 projects across 82 cities were refusing to service their mortgages.

New Home Prices Fall 0.9%

With buyers leary of betting on residential assets, new home prices in July fell 0.9 percent year-on-year, the fastest pace since September 2015, according to Reuters calculations based on NBS data. That slide happened at a quicker pace than the 0.5 percent decline reported in June,

The accelerating deterioration in home prices is happening despite local government moves to prop up demand.

In May, the city of Wuxi in Jiangsu province lifted restrictions on purchases of homes measuring more than 144 square metres and the Anhui provincial capital of Hefei reduced the down payment requirement for families with two minor children to 30 percent, from the previous 40 percent.

Earlier this month, the city of Langfang near Beijing dropped all constraints on home buying in an effort to boost demand.

During July new home prices dropped in 40 out of 70 large- and medium-sized cities surveyed by the NBS – two more than the count for June.

Smaller Cities Hit Hardest

The latest batch of government data showed an ongoing decline in new home prices in China’s second- and third-tier cities, with prices edging gently upward in the first tier cities of Beijing, Shanghai, Guangzhou and Shenzhen.

The thirty-five cities in the NBS’ third-tier category, including Wuxi and Guilin in Guangxi province, recorded the largest decline in home prices, falling 3.2 percent year-on-year compared to a 2.8 percent annualised decline in June.

The thirty-one second-tier cities, including Wuhan in Hubei province, Zhengzhou in Henan and Nanjing in Jiangsu, saw new home prices slip by an average of 2.5 percent compared to last July, or 0.3 percentage points faster than the 2.2 percent drop-off reported in June.

Despite the overall decline in home prices nationwide, China’s top tier cities saw home prices grow by an average of 3.1 percent year on year, although that marked a deceleration from the 3.3 percent upswing reported for June.