(Bloomberg) -- China’s home prices fell for the first time in six years as a property slump deepens in the world’s second-largest economy.
New-home prices in 70 cities, excluding state-subsidized housing, slid 0.08% in September from August, the first drop since April 2015, National Bureau of Statistics figures showed Wednesday. Values in the secondary market declined 0.19%, down for a second month.
A slump in the home market is becoming more evident as developers including China Evergrande Group struggle to raise money and buyers stay away. Falling prices may fuel a vicious cycle by further weakening demand, worsening the cash shortage at builders and forcing them to offer bigger discounts.
September is traditionally a peak season for the home market. Yet residential sales tumbled 17% by area, investments slid for the first time since early 2020, and the rate of failed land auctions climbed to the highest since at least 2018.
Read more on the impact of land auction flops
The downturn has continued into this month. Existing-home sales plunged 63% from a year earlier in the first 17 days of October, according to a Nomura Holdings (NYSE:NMR) Inc. note Monday.
“The new-home market faces relatively big downward pressure in the short term,” Yang Kewei, a research director at China Real Estate Information Corp., said before the figures were released. “The effects of price discounts are waning.”
Fears of contagion from the crisis at Evergrande have intensified after a surprise default by Fantasia Holdings Group Co. and a wave of credit rating downgrades at other developers. Yields on Chinese high-yield dollar bonds, which are dominated by builders, have climbed to their highest in about a decade, hurting a key funding channel for the sector.
That will have a knock-on effect on the broader economy, since Goldman Sachs Group Inc (NYSE:GS). estimates the property sector and related downstream industries make up almost a quarter of gross domestic product.
Still, China’s central bank has said risks posed to the domestic economy by Evergrande can be contained. The property firm’s trouble “casts a little bit of concern,” People’s Bank of China Governor Yi Gang said at a virtual meeting of the Group of 30 on Sunday.
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