In China, new home prices experienced their most rapid decline in over eight years in March, as the debt challenges faced by major property developers continued to dampen demand and affect the economic outlook.

The country's property sector, which contributes nearly a quarter of the economy, has been grappling with a debt crisis since 2021. This crisis was triggered by a regulatory crackdown on high leverage among developers, leading to a liquidity crunch. Several developers reported weaker financial results for 2023 last month.

In March, new home prices fell by 2.2% compared to the previous year, marking the largest decline since August 2015 and surpassing the 1.4% drop observed in February. Month-on-month, prices fell by 0.3%, matching February's decline.

To address the challenges in the property sector, Chinese authorities have implemented various measures. These include easing home purchase restrictions, supporting urban village renovation, and urging banks to expedite loan approvals for cash-strapped developers. However, analysts note that many of these policies have limited short-term impact, which has kept home buying sentiment subdued and hindered a broader recovery.

The decline in home prices has been observed across tier-one, tier-two, and tier-three cities. Despite faster-than-expected GDP growth in the first quarter, the property market continues to act as a drag on the economy as it seeks stability after the COVID-19 pandemic.

Economists anticipate that the property downturn will weigh on GDP growth by 0.3 percentage points in 2024, with property investment expected to decline by 12% this year. Concerns about indebted developers' ability to deliver projects on time have also led potential buyers to be cautious about purchasing new homes.

Vice Premier He Lifeng emphasized the importance of financing support for real estate projects to ensure timely delivery of homes, which would help stabilize expectations. However, without more aggressive stimulus measures, confidence and prices may not rebound as quickly as desired.

In summary, the Chinese property market's challenges persist, with declining prices and subdued demand posing risks to the broader economy. Despite government efforts to support the sector, the outlook remains uncertain, and a sustained recovery may require additional intervention.