China new home prices stagnant in July as demand stays weak

China's new home prices remained stagnant in July, highlighting difficulties in reviving the housing sector as demand stayed low, according to Reuters calculations based on National Bureau of Statistics data. Prices dropped 0.1 percent month-on-month, mirroring June's decline, while annual prices fell 3.2 percent, slightly lessening from a 3.3 percent decrease in June.

The housing market's prolonged slump has contributed to economic growth pressures, as weak home sales and falling asset values have impacted domestic consumption and investment, offsetting gains in manufacturing and exports. While some improvement has been observed in select markets this year, gains have been primarily concentrated in major cities and have not signaled a nationwide recovery in housing demand.

Only 17 out of 70 surveyed cities recorded month-on-month home price gains in July, representing less than a third of the total, signaling that the overall market remains in its adjustment phase. Analyst Zhang Dawei from Centaline Property noted that the divergent recovery pattern in the property market is likely to persist. In response to the situation, local governments are anticipated to continue implementing measures tailored to local conditions, with major cities focusing on unlocking demand from home upgraders and lower-tier cities concentrating on reducing housing inventories.

Economic growth slowed in the second quarter, expanding at 4.3 percent year-on-year, the weakest pace in over three years. Data from separate economic indicators showed that retail sales, a measure of consumption, grew less than expected in July, and industrial output growth also decelerated. Property sales, investment, and new construction starts all contracted at a faster pace in the first seven months of the year, according to official data.

In late July, China's top leadership pledged to bolster the economy with accelerated fiscal spending and new policies, though no major stimulus measures were announced. The meeting did not indicate stronger support for the housing market, even though it acknowledged the need to stabilize it. The recovery in larger cities also lost momentum in July, with new home prices in tier-one cities remaining unchanged from the previous month, after rising 0.1 percent in June.

Prices in tier-two cities fell 0.1 percent, compared with no change a month earlier, while prices in tier-three cities dropped 0.3 percent. Existing home prices in tier-one cities rose 0.2 percent month-on-month in July, slowing from a 0.3 percent increase in June, while declines continued in smaller cities.