China’s Home Sales Slump Persists, Clouding Economic Outlook

(Bloomberg) -- China’s major developers saw home sales tumble last month, prolonging the real estate slump and putting more pressure on growth in the world’s second-largest economy. 

New-home sales by area at the nation’s top 100 developers fell 32% in October from a year earlier, a report by property research firm China Real Estate Information Corp. showed on Monday. Sales rose 1.4% from a month earlier.

Both September and October are traditionally fast seasons for homebuying, but sentiment has evaporated amid the widening crisis at China Evergrande Group, which is saddled with more than $300 billion in liabilities. The outlook for the property market doesn’t look promising and sales may continue to slow toward the end of the year, according to the CRIC report. 

The drop in transactions may exacerbate a cash crunch for the nation’s builders, as the government seeks to curtail leverage in the sector and bond refinancing becomes increasingly difficult. At least four builders defaulted on their debts last month, while Evergrande twice averted that fate by paying overdue coupons.

Regulators have been seeking to stabilize the property sector, which makes up about a quarter of gross domestic product. Economic growth slowed in the third quarter as the property and construction industries contracted for the first time since the start of the pandemic. 

The government and central bank have signaled they’re not rushing to counteract the slowdown with stimulus, prompting a number of economists to cut their growth forecasts for this year and next. 

Still, banks in some areas have accelerated issuing home loans and lowered mortgage rates, while the credit environment for developers is also improving, the official Securities Times said in a report last week. 

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With assistance from Bloomberg