Little Sign of Recovery as China’s Home Sales Drought Persists

China’s home sales slump continued in March, with new data showing a significant decline in the value of new home sales from the 100 biggest real estate companies. According to preliminary data from China Real Estate Information Corp, sales dropped about 46% from a year earlier to 358 billion yuan ($49.6 billion), following a 60% decline in February.

This prolonged downturn in the property market has had a ripple effect on the nation’s biggest builders and state-owned banks, as bad loans continue to rise. Beijing has called on banks to support the economy and help struggling developers.

Country Garden Holdings Co. and China Vanke Co., two major players in the residential space, have both faced challenges. Country Garden announced it will miss a deadline for reporting annual results, while China Vanke reported a 46% drop in net income last year.

Despite March traditionally being a strong period for home sales, the market remains weak. CRIC forecasts that April’s sales will either stay the same or see a slight increase from March.

The news of the property market weakness has led to Fitch Ratings downgrading the credit rating of some builders, including Vanke and Longfor Group Holdings Ltd, into junk territory. Fitch also revised its forecast for the housing market, now expecting a 5%-10% fall in new home sales this year.

Investors are closely watching the market reaction, with an index tracking major developer shares listed on the mainland rising as much as 1.6% on Monday morning. The Hong Kong stock exchange, however, is closed for a holiday.