Stresses in China’s property market were underlined by data on Wednesday that showed new home prices in December endured their steepest monthly decline since February 2015.

Prices of new homes measured across 70 large and medium-sized Chinese cities fell 0.4% month-on-month in December, following a 0.3% month-over-month drop in November, according to figures from the National Bureau of Statistics and interpreted by the South China Morning Post.

Over the year, prices in the 70 cities fell by 0.9%. Overall real estate investment fell by 9.6% in 2023 to 11.09 trillion yuan ($1.5 trillion), similar to the decline seen in the previous year.

Among the larger cities, new home prices fell by 1% in Guangzhou and 0.9% in Shenzhen, and stayed flat in Beijing. Prices in Shanghai, however, were up 0.2%.

In tier-two cities, prices for new homes fell by 0.4% month on month, up from November’s 0.3% fall.

Previously-owned homes fell by 0.1% in tier-one cities after a 0.3% increase in November, with declines of 3.6% in Shenzhen and 3% in Guangzhou. Bejing’s second-hand home prices rose 1.7%, while Shanghai saw an increase of 4.5%.

Also Read: China Housing Shock: Property Shares Under Renewed Pressure After Weak Data

Property Shares Fall

Among the top developers, U.S.-listed shares in China Resources Land Ltd (OTC:CRBJF) are down around 5% so far in 2024, while Longfor Group Holdings ADR (OTC:LGFRY) has slumped 28.5%.

In Hong Kong, the Hang Seng index ended Wednesday’s session 3.7% lower while the Shanghai Composite lost 2.1%.

Longfor’s Hang Seng-listed shares were 6.8% lower while China Resources Land was down 4.3%.

The iShares MSCI China ETF (NYSE:MCHI), which tracks China’s biggest stocks, fell 3% on Wednesday and was down 10% in January.

Falling Demand, Falling Population

Among the reasons for falling prices is lack of demand. Data published earlier this month by the China Index Academy showed that average daily home sales during the last week in December fell by 26% compared to the same period a year ago.

“Both sides of the market supply and demand weakened, the saleable area fell back but remained at a high level, and the clearance period was extended to 19.6 months,” the researchers said.

Meanwhile, China has a rapidly aging population, despite a growing death rate in 2023 due to the sudden lifting of all COVID-19 restrictions in late 2022. Official data published on Wednesday showed China’s population fell for the second consecutive year in 2023.

The population decline in 2022 was its first in 60 years.

China’s diminishing workforce will have an ongoing impact on the property sector in the years to come — even as the government attempts to lend support with first-time buyer subsidies and tax relief on certain homes.

Now Read: As China’s Population Declines In 2023, Will Aging Demographics Boost Healthcare Stocks?

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Wednesday, January 17, 2024