China’s resale prices register smallest monthly drop in eight months

Official data for January point to a modest easing in China’s property-price contraction: resale (secondary‑market) prices across 70 cities fell 0.54% month‑on‑month, the mildest monthly drop in eight months, while new-home prices excluding subsidized units declined 0.37%, the same pace as December. The softer monthly falls reduce the immediate risk of fire‑sales and abrupt asset writedowns for banks and local governments reliant on land‑sale receipts. The timing coincides with the People’s Bank of China trimming its main bank loan benchmark to a record low, which lowers short‑term borrowing costs, puts downward pressure on market yields and makes lending to marginal borrowers more attractive. Cheaper loans can help stabilize transactional activity and support funding for selective projects — particularly completed or near‑complete developments — but longstanding solvency pressures at some developers mean rate relief alone is unlikely to revive demand broadly. For lenders, the combination of narrower price declines and looser policy reduces near‑term provisioning risk but pressures interest margins and raises the importance of credit‑quality controls if lending expands. Policymakers face a narrow window to use this breathing room: targeted fiscal and supervisory actions that prioritize completion financing and mortgage protections would amplify the central bank’s impact without triggering speculative excess. Key indicators to watch in coming weeks include spring sales volumes, on‑the‑ground project completions, mortgage delinquency trends and any further calibrations of targeted credit measures. If month‑on‑month improvements continue, systemic risks to banks and municipal finances should fade; if prices slip again, pressures on developer liquidity and local government revenues could quickly intensify. In short, January’s readings and the PBoC move together lower tail risks and buy time for policy makers, but they stop short of signaling a durable market turnaround.