China’s home prices fell for the 13th straight month in
September as sentiment remained weak, highlighting President Xi Jinping’s
challenge to arrest a slumping property market after he secured position for
the historic third term. According to analysts, the government has to implement
stronger measures to address the woes of the nation’s real estate sector. A
heightened debt crisis, mortgage boycotts, and Covid-19 curbs weighed on
homebuyers’ sentiments.

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New home prices in 70 cities, excluding state-subsidized
housing, fell 0.28% last month from August, when they dropped 0.29%, according
to National Bureau of Statistics (NBS) data compiled by Bloomberg. Existing
home prices fell 0.39% last month, the most since October 2014.

On a yearly basis, new home prices fell 1.5% in September,
the sharpest decline since August 2015, according to NBS data.

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“The drop in China’s home prices was within market
expectations, given the state of the economy, the Covid-19 situation, and
negative news from developers,” said Raymond Cheng, head of China and Hong Kong
research and property at CGS-CIMB Securities.

“The government needs to revive homebuyer and market
sentiment, and the current policy measures are not enough to solve the main
problems of securing enough financing for property developers and boosting home
sales,” he said.

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China’s real estate sector has faced serious headwinds since
the central government introduced the “three red lines” policy in August 2020
to control borrowing and leverage in the sector. Rising debt defaults among
distressed developers and a mortgage-boycott crisis in dozens of cities across
the mainland have affected demand, putting the housing market under pressure.

Several government reports showed home sales and property
investment continued to fall last month, though the pace of declines eased.

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The Chinese government has eased home ownership rules,
lowered interest rates, and urged banks to boost lending in a bid to turn
around the weak property market, which continues to burden the world’s
second-largest economy. Expectations for more substantive industry support have
faded after President Jinping gave a little signal of a deeper shift in
policies on housing or Covid Zero during the ruling party’s Congress.

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Home sales dropped 15% in September from a year ago,
improving from a 21% decline in August, according to a Bloomberg report based
on data released by the National Statistics Bureau. Real estate investment
declined 12% year-on-year, after falling 14% in August.

The People’s Bank of China said in September that cities,
where new home prices dropped from June through August, could lower mortgage
rates for first-time buyers.

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According to a recent central bank survey, 73% of households
expect property prices to remain unchanged or fall in the short term,
representing decreasing consumer confidence amid weak job prospects and a
weakening economy.