New Home Price Decline Across 70 Cities Narrowed in July, with Tier-1 and Tier-2 Cities Rebounding Month-on-Month

Overview

National Bureau of Statistics data for 70 cities indicate that China's new home price decline moderated in July: after Goldman's seasonal adjustment, weighted-average new home prices declined at an annualized month-on-month rate of 0.8% and fell 3.2% year-on-year, both slightly improved from June. Tier-1 and Tier-2 cities recorded month-on-month increases, while the decline in Tier-3 cities continued to narrow; however, the existing home market weakened, indicating that the overall property market remains in a differentiated recovery phase.

Core views

The marginal improvement in the new home market is primarily reflected in a narrower price decline and a rebound in higher-tier cities, but it does not mean the sector has fully stabilized. New home prices are affected by local-government price controls and therefore generally fluctuate less than existing home prices; consequently, the continued decline in existing home prices and transactions below year-ago levels remain more important signs of weakness. The slight decline in months of inventory provides a positive signal, but subsequent transaction activity and existing home prices are needed to confirm whether the improvement is sustainable.

Analysis framework

The report uses National Bureau of Statistics data on new and existing home prices across 70 cities, applying weighted averages and seasonally adjusted annualized month-on-month indicators to assess price momentum and comparing results across Tier-1, Tier-2, and Tier-3 cities. It also incorporates high-frequency new home transactions in 30 cities and months of inventory in key cities to evaluate supply and demand conditions.

Methodology notes

• Data ProcessingSeasonal Adjustment

  Annualized Month-on-Month Price Change

  Goldman Sachs seasonally adjusts and annualizes monthly price data to reduce the impact of seasonal factors on assessments of short-term price momentum.

• Market Tracking70-City Home Price Index

  Weighted-Average Price Change

  National Bureau of Statistics data for 70 cities are used to measure weighted-average price changes separately for new and existing home markets.

• Supply-Demand AnalysisMonths of Inventory

  Ratio of Saleable Floor Area to Sales Floor Area Over the Past 12 Months

  Market inventory absorption pressure is measured by dividing saleable floor area by rolling sales floor area over the past 12 months.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China New Home Market

  The price decline slowed in July, with month-on-month improvement in Tier-1 and Tier-2 cities.

  Strengths

  The annualized month-on-month decline in weighted-average new home prices narrowed; prices in Tier-1 and Tier-2 cities recorded positive growth; and months of inventory declined.

  Weaknesses

  Nationwide new home prices were still down 3.2% year-on-year; Tier-3 city prices remained in a clear downtrend; and local price controls may cause new home prices to understate actual market volatility.

  Comparison

  Compared with the new home market, the existing home market performed more weakly, with its annualized month-on-month price decline widening to 1.9% in July.

  Risks

  If transaction recovery falls short of expectations or improvements in higher-tier cities fail to broaden, the recovery in new home prices may be difficult to sustain.

• China Existing Home Market

  Existing home prices remained under pressure, representing the main signal that the property market has not yet fully stabilized.

  Strengths

  The year-on-year decline in existing home prices narrowed from 5.5% in June to 5.1% in July, although the improvement was limited.

  Weaknesses

  The annualized month-on-month decline widened from 1.4% to 1.9%; third-party and official data indicate that prices have fallen by approximately 5% to 8% over the past year.

  Comparison

  Existing home price movements generally reflect actual market supply and demand more accurately than new home prices; their performance was materially weaker than that of new homes in Tier-1 and Tier-2 cities.

  Risks

  Continued declines in existing home prices could weaken buyer expectations, the home-upgrade transaction chain, and developers' sales cash collections.

Key data

• Annualized Month-on-Month Change in New Home Prices Across 70 Cities (July, Seasonally Adjusted)-0.8%Compared with -1.0% in June, indicating a narrower decline.
• Year-on-Year Change in New Home Prices Across 70 Cities (July)-3.2%Compared with -3.3% in June.
• Annualized Month-on-Month Change in Existing Home Prices Across 70 Cities (July, Seasonally Adjusted)-1.9%Compared with -1.4% in June, indicating a wider decline.
• Year-on-Year Change in Existing Home Prices Across 70 Cities (July)-5.1%Compared with -5.5% in June.
• Annualized Month-on-Month Change in New Home Prices in Tier-1 Cities (July)1.3%Compared with 1.8% in June, led by Shenzhen.
• Annualized Month-on-Month Change in New Home Prices in Tier-2 Cities (July)0.1%Compared with -0.3% in June, turning positive.
• Annualized Month-on-Month Change in New Home Prices in Tier-3 Cities (July)-2.8%Compared with -3.1% in June, indicating a narrower decline.
• Months of Inventory in Key Cities (July)27.1 monthsCompared with 27.5 months in June, with the decline mainly driven by Tier-2 cities.

Impact & implications

Improving price data should help ease concerns over continued new home price declines and indicate some demand resilience in higher-tier cities. However, a widening decline in existing home prices may continue to weigh on household balance-sheet expectations and upgrade demand. The effectiveness of property policies and improvement in sector fundamentals still need to be validated by a more sustained recovery in transactions, inventory absorption, and stabilization in existing home prices.

Risks

• An accelerating decline in existing home prices could weigh on household homebuying expectations and demand for new homes.
• New home transactions in 30 cities were below year-ago levels in mid-August; while short-term activity was disrupted by typhoons and flooding, the risk of weak demand still warrants attention.
• Continued price declines in Tier-3 cities reflect unresolved regional divergence and inventory pressure.
• Some third-party existing home price series have stopped publication, which may reduce the continuity of cross-source tracking.

What to watch

• The extent of recovery in new home transactions across 30 cities after weather-related disruptions subside.
• Whether the month-on-month decline in existing home prices can narrow and improve market expectations.
• Whether price increases in Tier-1 and Tier-2 cities can persist and spread to a broader range of cities.
• Whether months of inventory in key cities continue to decline.
• Subsequent property-support policies and their transmission effects on sales, inventory, and prices.