China’s property slump remained a drag on the economy in September despite several steps taken by authorities in recent months to bolster the sector.
Property investment, a key driver of economic activity, contracted 9.1% in January-September from a year ago, a bigger drop than the 8.8% decline in the first eight months of the year, official data showed Wednesday.
Home sales continued to decline, falling 3.2% year-to-date, while construction of new homes plunged almost 24% in the period.
“With the property market’s deterioration showing no signs of slowing, a black cloud lingers overhead,” Harry Murphy Cruise, an economist at Moody’s Analytics, wrote in a note. “Direct support for households could be the aspirin needed to shake the property hangover, but such support looks increasingly unlikely.”
China’s broad relaxation of downpayment requirements in the largest cities came into effect toward the end of September. But the data on home sales from China’s October holiday saw only a slight improvement. Homebuyers remain worried that construction of new houses will remain delayed, given the financial stress property developers are facing.
For September alone, the data provided some glimmer of hope. Home sales declined 13.6% by value in September from a year earlier, easing from a 16.4% drop in August, according to calculations from Huatai Securities based official figures.
“When it comes to property, it’s about renewing confidence on the ground,” Catherine Yeung, investment director at Fidelity International, said in an interview with Bloomberg TV on Wednesday. While Chinese households remain wealthy and aren’t as indebted as those in South Korea and other places, it will take time for sentiment in housing to improve, she said.
The slump in construction is having a knock-on effect on commodity producers and industrial production. Steel, cement and glass output all posted declines in September, while sales of household electronics and office supplies continued to slump.
The plunge in housing sales deprives Chinese developers with a key source of funding and has fueled a two-year crisis that’s put giants at liquidity risk. Country Garden Holdings Co., a developer that was once a pillar of the industry, has warned it may default on its debt.
Wednesday’s data had more bad news for the liquidity situation of property developers. Funding for property development dropped 13.5% on-year in the first nine months, after plunging 12.9% in the January-August period. Funding from banks in the form of loans improved slightly, while advance payments for housing worsened.
--With assistance from Ailing Tan and Emma Dong.
