China's property woes deepen as home sales decline 22% amid market uncertainty

China’s property market continued to decline in August, with new-home sales from the top 100 real estate companies plummeting 22 per cent from the previous year, outpacing the 19.7% drop in July, according to preliminary data from China Real Estate Information Corp.

The value of transactions decreased 2.43 per cent from July, following a significant 36 per cent month-on-month decline. This accelerating downturn indicates the diminishing effectiveness of the rescue package introduced in May.

Concerned over the market situation, at least 10 city governments have relaxed or eliminated new-home price controls, allowing market forces to play a more significant role to prompt more real estate companies to reduce prices.

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According to Bloomberg Economics, the struggling sector remains a significant drag on China’s economy, which requires additional stimulus to achieve the government’s 5% growth target for the year.

Over the past two years, the crisis has impacted the job market, consumption, and household wealth. China is considering a new funding option for local governments to purchase unsold homes and support the market to address the issue. Under this proposal, local governments would be able to finance their home purchases through special bonds.

As of July, China had a staggering 382 million square meters of unsold new homes, equivalent to the size of Detroit, according to official data cited by Bloomberg. Cash-strapped developers, many of whom have been in default for over a year, are relying on a sales revival to persuade debt holders and avoid liquidation.

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Recently, Dexin China Holdings Co. was ordered to liquidate by a Hong Kong court, and Country Garden Holdings Co. is contemplating extending payments on some of its yuan bonds again, as reported by Bloomberg News earlier this week.

Some property developers are resorting to unusual promotions to help clear the large numbers of unsold homes across the country.