China’s new home prices fell for the second month in a row in July, decreasing by 0.3% compared to June. The drop became less severe in big cities as local governments introduced incentives for homebuyers. According to calculations by Reuters using data from the National Bureau of Statistics, 60 out of 70 cities surveyed saw month-on-month price declines, a trend similar to June. On a yearly basis, home prices dropped by 2.8%, which is a slight improvement from June’s 3.2% decline. Prices decreased at a slower rate across all city tiers. Policymakers are working to stabilize the property market, which once accounted for a quarter of China’s economic activity, as part of their strategy to achieve around 5% GDP growth amid various challenges.

Government Incentives And Policies

Despite multiple measures to boost demand and provide support to developers, a lasting recovery has not yet occurred. Recent strategies included using housing provident funds, offering purchase subsidies, and easing suburban buying restrictions in Beijing while keeping limits within the fifth ring road. Additional reports revealed that China’s property investment fell by 12.0% year-on-year from January to July, a steeper drop than the 11.2% decline in the first half of the year. The ongoing weakness in China’s property sector is a significant issue, echoing the price drops seen in mid-2024. Data indicates that new home prices are still declining each month despite government support efforts. This suggests that the market has not reached its bottom, making investments in this sector very risky in the near term. The latest data for July 2025 shows property investment has decreased by 9.5% year-on-year, indicating the problem goes beyond just home prices. This lack of confidence is evident in the Hang Seng Mainland Properties Index, which has dropped over 15% since the year’s start. The government’s inability to provide strong support continues to dampen investor sentiment.

Market Implications And Strategies

With the slowdown in construction activity, it’s wise to consider bearish positions on related industrial commodities. For example, iron ore futures have recently fallen below $110 a tonne on the Singapore Exchange due to reduced demand forecasts. Buying put options on major mining companies that rely heavily on China could be a smart way to hedge against further declines. We can expect ongoing pressure on the yuan, as the People’s Bank of China may need to implement more monetary easing to kick-start the economy. This situation makes shorting the offshore yuan (CNH) against the dollar an appealing strategy using futures contracts. Additionally, buying put options on broad China-focused ETFs can help protect against a more extensive economic slowdown. The steady stream of policy announcements accompanied by disappointing data is causing significant implied volatility. We could use options strategies like long straddles on key Chinese bank stocks. This approach allows us to profit from substantial price movements in either direction, whether from an unexpected stimulus package or another major developer default. Create your live VT Markets account and start trading now.

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