NEW home prices in China grew at their weakest pace in nearly two years in January, as the economy slows and a coronavirus outbreak brings the country’s property market to a standstill.

Worryingly, analysts say the worst is yet to come for the property market, noting that with stepped-up measures to contain the spread of the epidemic, aggressive price-cutting by developers and widespread business disruption will be fully reflected only in coming months.

Average new home prices in China’s 70 major cities rose 0.2 percent in January from the previous month, lower than a 0.3 percent gain in the previous month and marking the slowest pace since February 2018, according to media calculations based on National Bureau of Statistics (NBS) data released yesterday.

On a year-on-year basis, home prices rose 6.3 percent in January, slowing from a 6.6 percent rise in the December, hitting an 18-month low.

Home sales have plummeted as the virus outbreak keeps property showrooms shut and potential buyers are afraid or unable to venture outside for long.

“Overall, the prices data have yet to reflect the impact from the coronavirus. There will be widespread price cutting in the country in February,” said Zhang Dawei, a Beijing-based analyst with property consultancy Centaline, in a note to clients.

Most of the 70 cities surveyed by the NBS still reported monthly price increases for new homes, though the number was down to 47 from 50 in December.

Speculation is growing that more local governments and banks may relax restrictions on buyers to reduce pressure on the economy. China has clamped down on property speculation since 2016 to stop prices from overheating, but they had still risen for nearly six straight years.

Property prices had already been expected to cool this year before the outbreak as economic growth slowed. Real estate investment had hit a two-year low in December.

China Evergrande Group, the third-largest developer by sales in the country, said Sunday that it will offer 25 percent discount for all properties on sales from Feb. 18 to Feb. 29.

January property sales by value reported by Chinese top 100 developers fell 12 percent from same period a year earlier, according to property researcher CRIC. The NBS will only release January-February combined official sales data in March.

“The required closure of sales offices of property developers may challenge their liquidity conditions amid rising debt repayment pressure and the cooling property sector, especially for those with high exposure to virus-affected regions,” analysts with Nomura said in a note prior to the data release.

(SD-Agencies)