China's new home sales slide for 10th month with buyers sidelined, lending push failing to halt liquidity crisis

China's property developers recorded another set of dismal operating results as new home sales tumbled for a 10th straight month, suggesting it would be premature to expect a turnaround in a three-year slump in the industry.

Sales at the nation's 100 biggest home builders tumbled 46 per cent to 358.3 billion yuan (US$49.6 billion) in March from a year earlier, according to data published by China Real Estate Information Corp (CRIC), following an annualised 60 per cent slide in February. First-quarter sales fell 48 per cent to 779.2 billion yuan, it added.

March's decline marked the 10th in a row of shrinking sales. It was almost double the figure a month earlier because of the low-base effect when new home sales in February hit the lowest level since 2019.

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"Sentiment is still weak, demand is still lacklustre and the market outlook is still unclear at this point," CRIC analysts said in the report published on Sunday. "We do not expect to see a significant turnaround in terms of supply and demand in the coming months. Developers will continue to face pressure on home sales."

The industry has struggled to rebound from China's "three red lines" policy unveiled in August 2020, a measure that shut the nation's weakest borrowers out of the capital market. A liquidity squeeze has since triggered an unprecedented crisis as junk-rated developers defaulted on more than US$160 billion of bonds since then, according to a Goldman Sachs estimate.

"Demand in China's property sector will be more polarised," said Wang Xingping, a senior analyst at Fitch Bohua. "Pre-owned homes offer more room for price negotiation and lower cost of transaction compared to new homes."

China Vanke, the second-largest by sales, last week said earnings tumbled by 46 per cent in 2023, the biggest slide since it went public in 1991. Longfor Group's earnings almost halved, while Sino-Ocean Group suffered another year of hefty losses. Country Garden, once China's largest developer by sales, said it would miss a deadline to file its annual results.

Bonds sold by China Vanke and Longfor lost their investment-grade quality, when they were downgraded into junk territory by Fitch Ratings last month.

Analysts at CRIC said new home sales in April could match or rise slightly from the level in March. Homebuyers became selective by picking projects undertaken by state-backed developers such as China Land Resources, as Beijing took steps to inject more liquidity and ease buying limits and mortgage rates.

The builder expressed optimism for a sector-wide stabilisation, echoing the People's Bank of China's remark last month that some "positive signals" have emerged in the country's property market.

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