China July property investment in biggest decline this year

BEIJING: China’s property investment by developers further worsened in July, down the most this year, while new construction starts suffered their biggest fall in nearly a decade, amid still tight funding conditions and weak sentiment.

China’s property market, which accounts for about a quarter of the economy, has been in a prolonged crisis since the summer of 2020 as cash-strapped developers defaulted on loans and bond repayments, leading to unfinished projects.

Wary buyer sentiment has also chilled new property investment by developers.

Property investment in July fell 12.3% year-on-year, widening from a 9.4% drop in June, according to Reuters calculations based on data from the National Bureau of Statistics (NBS) on Monday.

Property investment in January-July fell 6.4% from a year earlier, the most since March 2020.

“The recovery may be gradual and bumpy, a significant improvement in developer funding conditions may require more and broader easing, and there is a need for more policy support to restore confidence in the property sector and contain potential tail risks,” analysts at Goldman Sachs said in a research note.

In July, new construction starts by floor area fell at the fastest pace since January-February 2013 - down 45.4% - after a 45% slump in June.

In January-July, new construction starts tumbled 36.1%, extending from a 34.4% drop in the first half. Cash-strapped real estate firms have suffered from tight credit conditions since 2020.

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For developers, loans granted by domestic banks dropped 36.8%, while capital raised from abroad plunged 200% in July, according to Reuters calculations from the NBS data.

Household loans, including mortgages, fell to 121.7 billion yuan ($18.00 billion) in July from 848.2 billion in June, the central bank said on Friday.

Reflecting the poor buyer sentiment, new home prices fell 0.9% on year in July, the fastest pace since September 2015, and extending a 0.5% decline in June, Reuters calculations based on NBS data showed.