China’s real estate market is showing clear signs of stabilization and improvement following a series of supportive policies introduced by the government. After facing challenges earlier this year, recent data indicates a positive shift in transaction volumes and developer confidence.
In April, the real estate sector experienced a slowdown, with the unsold area of ordinary commodity housing reaching a peak of 746 million square meters, surpassing the previous high from over a decade ago. Prices of second-hand houses in major cities such as Beijing, Shanghai, Guangzhou, and Shenzhen declined to levels last seen in 2016.
To address these challenges, the People’s Bank of China and other institutions introduced measures on May 17 to stimulate the market. On October 17, additional policies were unveiled by the Ministry of Housing and Urban-Rural Development, the Ministry of Finance, and the Ministry of Natural Resources to promote stable and healthy development in the sector. These measures focus on controlling new housing supply, optimizing existing stock, and improving the quality of commodity housing construction.
The impact of these policies is becoming evident. In September, developers increased land acquisitions significantly. According to E&H Consulting, the total transacted construction area of urban residential land reached 54.065 million square meters, marking a year-on-year increase of 31.6% and a month-on-month rise of 25.9%. Land auctions in cities like Guangzhou, Shenzhen, and Chengdu saw active participation, with some premiums exceeding 30% and bidding rounds surpassing 100, leading to new highs in floor prices.
Real estate transaction volumes have also begun to stabilize since October. Data from China Real Estate Information Corp shows that during the National Day holiday, the purchased area of new housing projects in 23 key cities surged by 77% month-on-month and 65% year-on-year. In first-tier cities, the year-on-year growth reached an impressive 102%. Second-hand housing transactions are recovering steadily, with volumes doubling both month-on-month and year-on-year in 14 key cities during the second week of October. Cities like Shenzhen and Hangzhou reported the highest weekly transaction volumes of the year.
The latest policies introduced on October 17 further relax controls on the real estate market, including lifting restrictions on housing purchases and sales, removing price caps, and eliminating the distinction between ordinary and non-ordinary residential properties. These changes are expected to invigorate the market by attracting new participants and helping to reduce existing housing stock.
Notably, the new policies aim to complete the renovation of an additional 1 million housing units in urban villages and dilapidated areas through monetary compensation to residents, directly contributing to destocking. This initiative will also enable developers to establish a positive cash flow cycle, fostering a healthier market environment.
The removal of the distinction between ordinary and non-ordinary residential properties opens avenues for optimizing housing supply. This suggests that in the future, various types of improved housing could become new growth points for the real estate market. Earlier policy adjustments, such as the October 17, 2022 notice from the Ministry of Natural Resources allowing flexibility in floor area ratios for suburban housing projects, complement these efforts. Combined, these measures are building confidence in establishing a new model for real estate development in China.
While real estate prices are still undergoing adjustment, with housing prices in major cities continuing to decrease from their peaks, this cyclical correction is considered a foundation for future stabilization and growth. The bottoming out of prices reflects a recalibration of consumer expectations and sets the stage for a more balanced and sustainable market.
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Real estate market stabilizes, showing clear signs of improvement
cgtn.com
