China: Real estate prices crash - impact on the economy and stock market

China: Real estate prices crash - impact on the economy and stock market

According to a report by finanzmarktwelt.de,

Real estate prices in China fell by the most in almost nine years in December. This underscores why authorities are supporting major cities to end the housing crisis, Bloomberg reports. Real estate sales in China have declined for 21 months in a row. Following disappointing economic data from China, the country's stock markets continued to slide, even though the country's official GDP was reported to have increased by 5.2%.

China: Real estate prices fall sharpest in recent years

New home prices in 70 cities in China (excluding government-subsidized housing) fell -0.45% last month from November, when they fell -0.37%, figures from the National Bureau of Statistics showed on Wednesday. The decline was the strongest since February 2015. Things didn't look any better on the used property market: prices fell by -0.79%, just as quickly as in the previous month.

Downturn in real estate weighs on economy

The ongoing downturn in China's real estate market has weighed heavily on the economy and increased pressure on developers struggling to repay debts and complete projects. That has led to a series of measures by authorities to halt the downward spiral, including the easing of home-buying restrictions last month in Beijing and Shanghai, two of the country's largest real estate markets.

The 21-month decline in property sales and the sharpest decline in property prices in nine years are expected to put further pressure on the Chinese property market. The -2.5% reduction in investment in the real estate sector in December and the forecast further 10% decline in the housing sector by 2025 are expected to lead to an overall decline in investment and economic growth.

While the Chinese government's support measures, such as easing restrictions on home purchases and signaling greater support for distressed developers, could restore confidence, they have so far had only a limited impact.

Overall, the Chinese real estate market remains volatile and buyer confidence remains weak, which has a negative impact on the country's economy. It remains to be seen whether further government measures can reverse the downward trend in the real estate market.