China Property Hit by Rare Convergence of Demand, Supply Declines

China's property woes worsened on all fronts last month, as price falls in both new and resale homes amid deeper contractions in construction starts and investment by developers piled pressure on the sector in a rare confluence of declines. The Chinese property market, accounting for a quarter of gross domestic product by some metrics, has slowed sharply since May, with sentiment increasingly shaken by stress in the sector in the wake of a growing liquidity crisis that has engulfed some of the country's biggest and most indebted developers. Most analysts, however, expect demand and supply to return to more normal conditions by the end of the year or early 2022 as regulators tweak their policies to stabilise the sector. Prices of new homes dropped 0.2% on average last month from September, according to Reuters calculations of data released by the National Bureau of Statistics (NBS) on Monday, the first decline since March 2015. In the resale market, prices slumped in all but six of the 70 major cities tracked by the bureau. On the supply side, new construction starts plunged 33.14% on year in October, extending the 13.54% fall in September, while overall investment by developers in projects dropped 5.4%, deepening from the 3.5% decline a month earlier, Reuters calculations of the NBS data showed. Tougher regulations on new borrowing since the summer of last year have squeezed developers financially and cast an ever lengthening shadow on new projects. China is expected to stand firm on policies to curb excess borrowing by developers and speculative home purchases, although it has eased financing conditions to help genuine home buyers.