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Yellow pylons work at a construction site in China. New home prices in China fell for a second month this year in May on still-volatile demand as widespread Covid-19 lockdowns dented already weak buyer confidence, suggesting more policy stimulus is needed to bring the market back up.

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New home prices in China fell for a second month this year in May on still-volatile demand as widespread Covid-19 lockdowns dented already weak buyer confidence, suggesting more policy stimulus is needed to bring the market back up.

Average new home prices in 70 major cities fell 0.1% month-on-month after falling 0.2% in April, according to Reuters calculations based on data from the National Bureau of Statistics (NBS) released Thursday.

Compared to last year, prices fell 0.1% for the first time since September 2015, after rising 0.7% in April.

Year-on-year price increases have slowed since last May due to a slowing economy, tight mortgage lending and weakening sentiment amid a liquidity crunch that has led to some high-profile defaults on loans from property developers.

Mainland property developer stocks tumbled Thursday, with the CSI300 real estate index down about 1.4% after gaining about 2% in early trading.

China’s property sector, traditionally a growth pillar, has deteriorated further in recent months, prompting authorities to take additional measures to boost housing demand hit by Covid-19 restrictions in some of the country’s largest cities.

Shanghai was closed for two months until the end of May, while Beijing closed entertainment and other establishments in some areas to contain outbreaks.

From January to May, real estate sales in the Chinese capital by area fell 16.8% compared to last year, according to local statistics bureau data released on Thursday.

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China’s central city of Wuhan, where the novel coronavirus was first detected in late 2019, eased restrictions on home purchases for some buyers in May, allowing households with more than one child to buy up to three properties.

In May, more than 100 cities adopted easing measures to support the real estate sector, mostly targeting homebuyers in small and medium-sized cities, including lower mortgage rates, a lower down payment and easier purchase rules.

In May, 25 of 70 cities surveyed by NBS reported increases in new home prices month-over-month, compared to 18 cities that recorded increases in April.

The real estate sector in small towns remained bleak last month, with monthly new home prices falling for the ninth month.

“Despite additional local housing easing measures in recent months, we believe property markets in lower tier cities may still face strong headwinds due to weaker growth fundamentals than major cities, including net outflows. population and potential oversupply problems,” Goldman Sachs analysts wrote. a note.

China’s property market troubles are likely to get worse this year, as prices remain flat and sales and investment continue to fall, according to a recent Reuters poll.

To boost demand, the financial authorities last month slashed the prime mortgage rate and lowered the minimum mortgage rate for first-time homebuyers.

Property sales by area fell at a slower pace in May for the first time in three months.

Additional easing policies to support demand are expected to boost the sector in the coming months.

More stimulus is needed to stabilize the real estate market, especially further lowering mortgage rates for buyers, said Zhang Dawei, an analyst at consultancy Centaline.

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