China’s new home prices fall in April for the first time since December as COVID plays its part.

China’s new home prices fell in April for the first time on a monthly basis since December, official data showed on Wednesday, depressed by fragile demand in smaller towns and strict, widespread COVID-19 shutdowns.

Average new home prices in 70 major cities fell 0.2% month on month, from zero growth in March, according to Reuters calculations based on April data from the National Bureau of Statistics (NBS).

New home prices rose 0.7% from a year earlier, the slowest pace since October 2015 and a release from a 1.5% gain in March.

The outlook for the Chinese property market has been bleak in recent months. The market, a mainstay of the world’s second largest economy, has been weakened by a government crackdown on excessive developer borrowing.

As of last month, more than 40 cities have taken steps to stimulate buyer interest, including subsidies, mortgage rate reductions and allowing larger loans from housing provident funds.

The northern city of Tianjin released a draft consultation on April 24 that would raise the maximum loan from such a fund for first-time home buyers to 800,000 yuan ($120,000), compared to 600,000 yuan previously.

Chinese financial authorities on Sunday authorized a further cut in mortgage interest rates for some homebuyers.

In April, 47 of the 70 cities surveyed by the NBS reported a drop in new home prices from the previous month, compared to 38 cities that reported a decline in March.

New home prices in Tier 3 and Tier 4 cities fell 0.6% in April, after falling 0.2% in March.

Prices in Tier 2 cities, such as Chengdu and Nanjing, fell 0.1% from zero growth in March. In Tier 1 cities, such as Shanghai and Beijing, prices rose 0.2% from growth of 0.4% in March.

“House prices fell in more cities in April. The housing sector is going through a crisis,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management.

“Government policy has become more supportive, but not overwhelmingly. There are still a lot of restrictions.”

COVID-19 outbreaks and prolonged lockdowns in dozens of cities have further weighed on the already vulnerable real estate market.

Shanghai endured lockdowns for about seven weeks. She plans to resume outdoor activities in stages and lift lockdowns by June.

“Household income was likely damaged by the Omicron outbreaks, and the lockdowns made real estate transactions and investments difficult,” Zhang said.

“It is not clear when the housing sector will rebound.”

For April, Shanghai new housing prices remained unchanged from the previous month. They had been rising since November 2020.

Data for April released on Monday, showing a plunge in property sales and a drop in investment, added uncertainty to the outlook for the property market.

Real estate sales in value in April fell by 46.6% compared to the previous year, the biggest drop since August 2006, and considerably more serious than the fall of 26.17% observed in March.

($1 = 6.7460 yuan) (Reporting by Liangping Gao and Ryan Woo; Editing by Bradley Perrett)

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