Why China’s housing market remains weak despite new government support measures

China's housing market continues to struggle despite recent government support measures. New home prices fell again in August, falling 0.1% from July, and 3.0% annually from the previous year, according to Reuters calculations from National Bureau of Statistics data. While tier-one cities have shown slight improvement with a 0.1% rise in new home prices, smaller markets continue to experience declines.

The ongoing weakness in housing prices has negatively impacted domestic consumption and local government revenues, and the property sector has contributed to economic slowdown. Beijing implemented new measures last month to encourage developers to move away from the presale model, which has faced criticism. Financial regulators also extended mortgage loan terms to 40 years from 30 years.

However, experts believe these measures may not lead to immediate improvements in housing demand. Property sales, real estate investment, and new construction starts all declined during the first eight months of 2022. The property sector's weakness has contributed to a slowdown in China's broader economy, with growth slowing to 4.3% in the second quarter.

The market's continued struggles highlight the challenges China's economy faces, relying on external demand to offset domestic consumption and investment drops.