China New Home Prices Rise in March Amid Seasonal Demand

New home prices in China edged higher in March, reversing a decline from the previous month as seasonal demand in major cities provided a boost. According to a survey by the China Index Academy, one of the country's largest property research firms, new home prices across 100 cities rose by 0.05% compared to February, which had seen a 0.04% decrease. The firm noted that an increased supply of high-quality projects in core urban areas helped drive this modest recovery in sales.

The continuity of this recovery in April will be critical.

Researchers emphasized that the performance of major cities in the coming weeks would be a bellwether for the rest of the year.

If momentum can be maintained in major cities, it will help improve market expectations and lay a stronger foundation for stable market performance throughout the year.

The broader property sector in China has been under significant pressure since 2020, when government-imposed restrictions on developer borrowing triggered a liquidity crisis. This downturn has left many developers unable to service their debts or finish pre-sold housing projects, complicating broader efforts to rebalance the economy. External factors, including rising trade protectionism and conflict in the Middle East, have further clouded the economic outlook.

While the decline in second-hand home prices has slowed, analysts suggest that a shift by buyers toward the secondary market could impact new home sales. Shi Lulu, director of Asia-Pacific corporate ratings at Fitch Ratings, noted in a recent research report that the market remains in a precarious state.

Given weak employment conditions, elevated housing inventory and other fundamental challenges, overall market sentiment remains fragile.

Shi Lulu added that escalating geopolitical tensions have introduced further uncertainty regarding whether the current recovery in the housing market can be sustained over the long term.