image credit: Dennis Jarvis
China’s property market recovery stays fragile as home prices record their biggest year-on-year decline ever. Among the 70 biggest cities tracked by the National Bureau of Statistics (NBS), 64 cities saw month-on-month drops in new home prices in January, 66 in December and 67 in November.
Meanwhile new home prices average a 5.1% fall from a year ago, in 69 of 70 cities, according to NBS.
Shenzhen and Ganzhou posted a price increase in January.
Shenzhen home prices were up by 0.3% and Ganzhou, in Jiangxi, by 0.2% from December. Home prices remained unchanged in Shanghai, Guangzhou, Nanjing, and Nanchang in Jiangxi.
In a move to stimulate the market amidst cooling property prices, a supply glut and moderate economic growth, the reserve requirements of major banks were slashed last month by the People's Bank of China. This followed on the heels of the central bank's surprise interest rate cut in November.
The housing sector made up about 15% of China's economy, which slowed to 7.4% last year. This is the slowest growth rate in over two decades for the world’s second largest economy.
According to analysts in a media report, housing prices across the board in China has been seeing a steady drop since the beginning of last year due to a supply overhang. A strong rebound in property prices is unlikely at least for a while.
With over $2 billion of its assets frozen by courts to protect its creditors, property developers like Kaisa is feeling the pain. Kaisa, with its debts now exceeding $10 billion, underscore the role which the sector of shadow banking plays in the slumping property market. Following the Global Financial Crisis, these non-traditional Chinese lenders, or trusts, have lent massive amounts to the sector, leading to ballooning debt.