China home prices remain weak, keeping pressure on economy

BEIJING, Sept 15 (Reuters) - China's new home prices fell again in August, underscoring persistent weakness in the housing market and suggesting the economy will struggle to generate momentum from domestic demand.

The sector's prolonged weakness suggests the real estate market will remain ‌a drag on the economy, constricting domestic consumption and straining local government income, unless policymakers launch strong stimulus to revive the sector.

The ‌economic imbalance has left policymakers facing growing pressure to revive the housing market with support measures and boost consumer spending to put growth on a more sustainable footing.

New home prices ​fell 0.1% in August, matching the decline in July and June, according to Reuters calculations based on data released by the National Bureau of Statistics.

On an annual basis, prices fell 3.0%, narrowing from a 3.2% drop in July, the slowest pace of decline this year.

"The year-on-year decline in home prices across cities of all tiers continues to narrow, which shows that the previous sustained downward trend in prices has been contained," said Zhang Dawei, chief analyst at Centaline ‌Property, adding that the market had likely passed ⁠its most pessimistic phase.

Still, a broad-based nationwide recovery was unlikely in the near term given the seasonal slowdown typically seen at this time of year, he said.

Price performance was uneven across the country. The biggest cities showed signs ⁠of stabilisation while smaller markets continued to struggle.

New home prices in tier-one cities rose 0.1% in August from July, snapping a prior monthly drop, while tier-two and tier-three cities saw declines.

Resale prices in tier-one cities also showed improvement, edging up in August.

China's real estate stock index and a gauge tracking Hong Kong-listed mainland developers ​both reversed ​early losses to trade higher.

The government issued a flurry of measures last month ​to guide developers away from a presale model that triggered ‌homebuyer protests when construction on the homes they paid for stalled after the downturn hit. Financial regulators also extended the maximum term for mortgage loans to 40 years from 30 years.

The measures seek to shore up homebuyer confidence and establish a less risky funding model for real estate development in the long run, but analysts said they were unlikely to tangibly improve housing demand in the short term.

"Whether the market can see further repair going forward will depend on the recovery of homebuyers' confidence, the release of reasonable housing demand, and how effectively local stabilisation ‌policies are implemented," Zhang said.