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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A five-bedroom Palo Alto home designed by Steven Ehrlich is listed for $44 million, making it the city’s most expensive listing. Built around a dramatic concrete spine, the home features four courtyards and a pool.
3 min
For years, tech entrepreneur Asher Waldfogel and his wife, Helyn MacLean, dreamed of building a modern house in Palo Alto, Calif.
The couple, however, worried about clashing with the Mediterranean-style architecture typically associated with their neighborhood of Old Palo Alto.
So they tapped architect Steven Ehrlich to create a design that paid homage to its surroundings with stucco, mahogany and titanium zinc cladding. They spent $20 million over several years building the house, completed in 2005.
Now looking to be closer to their adult daughter on the East Coast, they are putting the five-bedroom home on the market for $44 million—the most expensive listing in Palo Alto.
Waldfogel is an angel investor who co-founded Redback Networks, a telecommunications-equipment company. MacLean previously had a career in fundraising.
The couple purchased the roughly 0.4-acre site for $7.1 million in 2000 and demolished a circa-1930s Spanish Colonial home. The house they built pinwheels around a central staircase. It has 7,900 square feet of livable space, with four distinct courtyards and a pool.
A key feature of the home is a cast-in-place concrete wall, or spine, that is two stories high and about 80 feet long. “There’s a little bit of controlled chaos in what comes out of the form,” unlike a perfectly uniform surface, Waldfogel said. “If you want that, you do it in plastic.”
Waldfogel said he and his wife are thinking about the next phase of life now that their daughter is grown, although they have not decided where they will move. They also have a home in Sun Valley, Idaho.
“Right now we’re just trying to emotionally let go and decide what to do next,” he said.
Palo Alto, an epicenter of venture capital and tech startups in Silicon Valley, is home to some of the country’s biggest tech titans. Sales volume and prices are rising, with a median sale price of $3.5 million for the three months ending in August, up 5.8% year-over-year, according to real-estate brokerage Redfin.
Arthur Sharif of Sotheby’s International Realty—San Francisco Brokerage has the listing.
