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Home prices in China are falling faster as the economic downturn worsens

(Bloomberg) — Home prices in China fell for the second month in July, in another sign of a deepening real estate slowdown weighing on the world’s second-largest economy.

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National Bureau of Statistics figures on Wednesday showed new home prices in 70 cities, excluding state-subsidised housing, fell 0.23% last month compared to June, when they fell 0.06%. Prices fell 0.47% in the secondary market, according to the data.

The declines offer no comfort to developers like Country Garden Holdings, which faces a possible default after defaulting on bond payments this month as the housing market collapses. Risks also spread to the financial sector, as a trust company with significant exposure to real estate defaulted on some investment products.

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“The slowdown in the real estate market in August has not been eased,” said Chen Wenjing, associate director of research at China Index Holdings. “The lackluster market situation may persist in the short term, as domestic policy support takes time.”

The price drop last month was widespread, with 49 of the 70 cities tracked by the government seeing new home values ​​drop from the previous month, the biggest drop this year. In the current home market, where prices are less susceptible to government intervention, they have fallen in all but seven cities.

Shenzhen, a leading city in the south, saw prices fall 0.9% in the secondary market, heading closer to the level in June last year after Covid lockdowns halted economic activity.

Chinese developers need a turnaround in sales and pricing to mitigate a multi-year credit crunch that shows no sign of abating. A potential default by Country Garden, formerly the country’s largest developer by sales, threatens to have larger repercussions than its struggling peer China Evergrande Group.

The value of nationwide residential sales fell 43% in July from June to 654.5 billion yuan ($90 billion), the weakest monthly sales in nearly six years, according to Bloomberg calculations based on separate official data on Tuesday.

– With the help of James Meijer.

(Updates with charts and details in the fifth and sixth paragraphs)

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