China Home Sales Slump Deepened in January in Blow to Economy

  • Transactions have been falling since July, worsening cash woes
  • Property slowdown may continue to weigh on economic output

China’s property sales slump persisted in January with top developers seeing a steeper decline in transactions, signaling the sector may remain a drag on the economy.

The 100 biggest companies in China’s debt-ridden property industry suffered a 39.6% drop in sales from a year earlier, compared with a 35.2% decline in December, according to preliminary data by China Real Estate Information Corp.

Home sales have been falling since July last year, as buyer confidence weakened during a liquidity crisis that rippled through the industry following a crackdown on excess borrowing. The decline in transactions is worsening the cash crunch for property firms including China Evergrande Group, making it harder for them to pay their bills.

The outlook for the property market isn’t positive and sales may continue to trend downward in the months ahead, China Real Estate Information said.

Developers will be hoping this week’s Lunar New Year festivities will spur transactions. The holiday period is usually a good period for residential sales as people return to their home towns and have time to look at property.

China’s policy makers have been taking steps to limit the impact of the real estate slowdown on the world’s second-largest economy. Regulators are considering easing restrictions on how developers use cash from presold properties that’s tied up in escrow accounts, Bloomberg has reported. They’re also making it easier for stronger firms to obtain financing to acquire assets from stressed developers.

Source: Bloomberg

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