China's new home prices likely to remain stable in 2023, putting pressure on the economy: Reuters poll.

New home prices in China are not expected to rise this year, according to a Reuters poll, underscoring the huge pressures in a real estate crisis that is weakening the economy and forcing policymakers to work hard to restore confidence.

Home price growth is expected to be 0 percent, compared with a forecast of 1.4 percent in a previous Reuters poll of 12 economists conducted between Aug. 16 and Aug. 25.

Confidence in the real estate sector, which accounts for a quarter of China's economy, suffered last year after many homebuyers threatened to stop paying their mortgages because developers could not build pre-sold residential projects due to liquidity constraints and strict COVID-19 restrictions.

"China's slowing economic recovery and residents' conservative consumption indicate that real estate market participants have yet to regain confidence," said Wang Xingping, senior analyst at Fitch Bohua.

The authorities have introduced several measures over the past year to support the sector, including lowering down payments, allowing larger mortgages and lowering mortgage rates.

Real estate investment is forecast to fall 7.7% year-on-year this year, much faster than forecast in May (-4.2%). Home sales by area are expected to contract by 5.0% in 2023, down from an increase of 2.7% in the previous survey.

The world's second-largest economy has lost rapid growth since the start of the second quarter after initially recovering from COVID, hurt by weak demand at home and abroad, rising unemployment and problems in the real estate sector.

"It is estimated that each one percent drop in real estate investment could reduce the GDP growth rate by 0.1 percentage point," said analyst Ma Hong of Zhixin Research Institute.

Observers in China are skeptical about the possibility of a turnaround in the real estate sector in the near future, despite Beijing's supportive measures.

Three Chinese ministries have issued detailed regulations allowing local governments to waive the "no mortgage records" rule for determining the status of "first-time homebuyers".

Major cities are expected to open up access to buying property in some suburbs, "but that will hardly save the entire real estate sector from spiraling downward," said analyst Gao Yuhong of CSCI Pengyuan Credit Rating Limited.

Seven out of 12 economists expect the affordability of buying a first home to improve in the coming year.

But ANZ economist Xing Zhaopeng said the challenge for young people looking to buy their first home would be employment.TA