Home prices declined at a faster pace in May in major cities, while other data show a mixed picture for the world’s second-largest economy
3 min
China’s broken housing market isn’t responding to some of the country’s boldest stimulus measures to date—at least not yet.
The Chinese government has been stepping up support for housing and other industries in recent months as it tries to revitalize an economy that has continued to disappoint since the early days of the pandemic.
But fresh data for May showed that businesses and consumers remain cautious. Home prices continue to fall at an accelerating rate, and fixed-asset investment and industrial production, while growing, lost some momentum.
“China’s May economic data suggest that policymakers have a lot to do to sustain the fragile recovery,” Yao Wei, chief China economist at Société Générale, wrote in a client note on Monday.
The worst pain is in the property sector, which has been struggling to deal with oversupply and weak buyer sentiment since 2021, when a multiyear housing boom ended . The market still doesn’t appear to have found a floor, even after Beijing rolled out its most aggressive stimulus measures so far in mid-May in hopes of restoring confidence.
In major cities, new-home prices fell 4.3% in May compared with a year earlier, worse than a 3.5% decline in April, according to data released Monday by China’s National Bureau of Statistics. Prices in China’s secondhand home market tumbled 7.5%, compared with a 6.8% drop in April.
Home sales by value tumbled 30.5% in the first five months of this year compared with the same months last year.
“This data was certainly on the disappointing side and may ring some alarm bells, as May’s policy support package has not yet translated to a slower decline of housing prices, let alone a stabilisation,” said Lynn Song, chief China economist at ING.
Economists had also been hoping to see a wider recovery this month after Beijing started rolling out a planned issuance of 1 trillion yuan, the equivalent of $138 billion, in ultra-long sovereign bonds in May. The funds are designed to help pay for infrastructure and property projects backed by the authorities. Investors gobbled up the first batch of these bonds.
Monday’s bundle of economic data, however, underlined how the country still isn’t firing on all cylinders.
Retail sales, a key metric of consumer spending, rose 3.7% in May from a year earlier, compared with 2.3% in April, according to the National Bureau of Statistics. While the trend is heading in the right direction, it is still a relatively subdued level of growth, and below what most economists believe is needed to kick-start a major revival in consumer spending.
The expansion in industrial production—5.6% in May compared with a year earlier—was down from April’s 6.7% increase. Fixed-asset investment growth, of which 40% came from property and infrastructure sectors, also decelerated, to 3.5% year-over-year growth in May from 3.6% in April.
Key to the sluggish economic activity data in May—and China’s outlook going forward—is the crisis in the property market, which has proven hard for policymakers to address.
The property rescue package in May included letting local governments buy up unsold homes, removing minimum interest rates on mortgages, and reducing payments for potential home buyers. It also included as its centerpiece a $41 billion so-called re-lending program launched by the People’s Bank of China, which would provide funding to Chinese banks to support home purchases by state-owned firms.
The hope was that by stepping in as a buyer of last resort for millions of properties, the government would manage to mop up unsold housing inventory and persuade wary home buyers to re-enter the market. In turn, Chinese consumers, who have most of their wealth tied up in real estate, would feel more confident about spending again, thereby lifting the overall economy.
But the size of the re-lending program wasn’t big enough to convince home buyers, said Larry Hu , chief China economist at Macquarie Group. “Meanwhile, their income outlook also stays weak given the current economic condition,” he said.
For the property market to bottom out and reach a new equilibrium, mortgage rates, which stand at around 3-4% in China, need to be as low as rental yields, which are currently below 2% in major cities, said Zhaopeng Xing, a senior China strategist at ANZ. He said that a large mortgage rate cut will need to happen eventually.
The other key part of China’s push to revive growth revolves around the manufacturing sector, with leaders funnelling more investment into factories to boost output and reduce the country’s reliance on foreign suppliers of key technologies.
The result has been a surge in production. But with domestic consumption not strong enough to absorb all those goods, many factories have been forced to cut prices and seek out more overseas buyers.
Data released earlier this month showed that Chinese exports rose faster in May than the month before.
However, the export push is butting into resistance as governments around the world worry about the impact of cheap Chinese competition on domestic jobs and industries. The European Union last week said it would impose new import tariffs on Chinese electric vehicles, describing China’s auto industry as heavily subsidised by the government, to the point where other countries’ automakers can’t fairly compete.
The U.S. has also hit Chinese cars and some other products with hefty duties, while countries including Brazil, India and Turkey have opened antidumping investigations into Chinese steel, chemicals and other goods.
Beijing says such moves are protectionist and that its industries compete fairly with global rivals.
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What a quarter-million dollars gets you in the western capital.
Alexandre de Betak and his wife are focusing on their most personal project yet.
3 min
Many luxury hotels only build on their gilded reputations with each passing decade. But others are less fortunate. Here are five long-gone grandes dames that fell from grace—and one that persists, but in a significantly diminished form.
A magnet for celebrities, the Garden of Allah was once the scene-making equivalent of today’s Chateau Marmont. Frank Sinatra and Ava Gardner’s affair allegedly started there and Humphrey Bogart lived in one of its bungalows for a time.
Crimean expat Alla Nazimova leased a grand home in Hollywood after World War I, but soon turned it into a hotel, where she prioritised glamorous clientele. Others risked being ejected by guards and a fearsome dog dubbed the Hound of the Baskervilles. Demolished in the 1950s, the site’s now a parking lot.
The Astor family hoped to repeat their success when they opened this sequel to their megahit Waldorf Astoria hotel in 1904. It became an anchor of the nascent Theater District, buzzy (and naughty) enough to inspire Cole Porter to write in “High Society”: “Have you heard that Mimsie Starr…got pinched in the Astor Bar?”
That bar soon gained another reputation. “Gentlemen who preferred the company of other gentlemen would meet in a certain section of the bar,” said travel expert Henry Harteveldt of consulting firm Atmosphere Research. By the 1960s, the hotel had lost its lustre and was demolished; the 54-storey One Astor Plaza skyscraper was built in its place.
In the 1950s, colonial officers around Africa treated Mozambique as an off-duty playground. They flocked, in particular, to the Santa Carolina, a five-star hotel on a gorgeous archipelago off the country’s southern coast.
Run by a Portuguese businessman and his wife, the resort included an airstrip that ferried visitors in and out. Ask locals why the place was eventually reduced to rubble, and some whisper that the couple were cursed—and that’s why no one wanted to take over when the business collapsed in the ’70s. Today, seeing the abandoned, crumbled ruins and murals bleached by the sun, it’s hard to dismiss their superstitions entirely.
The overwater bungalow, a shorthand for barefoot luxury around the world, began in French Polynesia—but not with the locals. Instead, it was a marketing gimmick cooked up by a trio of rascally Americans. They moved to French Polynesia in the late 1950s, and soon tried to capitalise on the newly built international airport and a looming tourism boom.
That proved difficult because their five-room hotel on the island of Raiatea lacked a beach. They devised a fix: building rooms on pontoons above the water. They were an instant phenomenon, spreading around the islands and the world—per fan site OverwaterBungalows.net , there are now more than 9,000 worldwide, from the Maldives to Mexico. That first property, though, is no more.
The Ricker family started out as innkeepers, running a stagecoach stop in Maine in the 1790s. When Hiram Ricker took over the operation, the family expanded into the business by which it would make its fortune: water. Thanks to savvy marketing, by the 1870s, doctors were prescribing Poland Spring mineral water and die-hards were making pilgrimages to the source.
The Rickers opened the Poland Spring House in 1876, and eventually expanded it to include one of the earliest resort-based golf courses in the country, a barber shop, dance studio and music hall. By the turn of the century, it was among the most glamorous resort complexes in New England.
Mismanagement eventually forced its sale in 1962, and both the water operation and hospitality holdings went through several owners and operators. While the water venture retains its prominence, the hotel has weathered less well, becoming a pleasant—but far from luxurious—mid-market resort. Former NYU hospitality professor Bjorn Hanson says attempts at upgrading over the decades have been futile. “I was a consultant to a developer in the 1970s to return the resort to its ‘former glory,’ but it never happened.”
