China Sees Rise in New Home Prices in Some Cities in January

China’s new home prices rose in January for the first time in a year, according to official data on Thursday.

The news comes amid a range of factors that may have stimulated demand, such as the end of the country’s zero-Covid restrictions, and more favourable property policies.

New home prices in January were up 0.1% month-on-month, versus a 0.2% slide in December, according to calculations based on National Bureau of Statistics (NBS) data released on Thursday.

A rise in new home prices was reported in 36 cities among 70 surveyed by the NBS last month, up from 15 in December.

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Stimulus envisaged in 2nd quarter

Analysts see rising home prices as a positive sign, but believe more stimulative policies are needed to lift currently dismal demand and spark a longer-term recovery.

The market expects Beijing will roll out more easing measures to further revive the sector, especially during or after a highly-anticipated annual parliament meeting starting in early March.

“We believe that with the strong policy support from both demand and financing side, the sales will start to rebound significantly from late Q2. Any early boom will be positive for the growth outlook,” Zhou Hao, chief economist at Guotai Junan International, said.

The property sector, once an engine of the world’s second-largest economy, has been hobbled by fragile demand and developers’ mounting debt defaults.

Authorities have rolled out a flurry of aggressive stimulus measures to prop up the sector since late last year, including encouraging property financing and allowing eligible cities to cut or abolish the floor on mortgage rates for first-home buyers.

Recovery patchy but sentiment improving

Sentiment has been improving, buoyed by Beijing’s Covid policy U-turn in December and supportive measures, but the recovery has been patchy, with private surveys showing home sales by floor area slumping around 20% from a year earlier.

Official sales figures will be released in mid-February. Prices were down 1.5% year-on-year in January, with the rate of decline unchanged from December.

“The roots of the crisis in China’s property sector lie in the worsening long-term outlook for demand,” said Mark Williams, chief Asia economist at Capital Economics. “This has not improved. But sales started the year so beaten down that a short-run cyclical recovery is likely.”