Stimulus Impact: China’s largest monetary stimulus since the pandemic has triggered a rebound in property sales, with indications of recovery visible in new home purchases and rising prices among top developers.
Regional Differences: While cities like Wuxi and Beijing show signs of cautious buying and price drops, first-time buyers in Guangzhou are purchasing second-hand homes amid easing restrictions.
Market Uncertainties: Despite some optimism, persistent issues include reduced sales team earnings, unsold properties, and significant price declines in the second-hand market, raising concerns about sustained growth.
China property market shows tentative recovery as property sales rose in October following major monetary stimulus. Cities like Wuxi, Beijing, and Guangzhou exhibit mixed signals: while new home purchases pick up and some restrictions ease, the market faces challenges, including substantial second-hand price drops and cautious consumer sentiment. Analysts believe government policies may temporarily boost the market but not reverse its overall downturn, influenced by long-term issues like a shrinking population. Upcoming fiscal measures are expected to aid local governments but may not significantly change consumer-level outcomes.
China Property Market
In Wuxi, located west of Shanghai, purchasers are exchanging old residences for new constructions. In Guangzhou, located in southern China, and Beijing, the nation’s capital, first-time purchasers are seizing the opportunity of declining prices to acquire second-hand properties. However, in the north-west region of Shaanxi province, sales representatives are experiencing salary reductions due to unsold properties.
Following over three years of turmoil, there are indications of recovery in China’s real estate market. Sales increased in October for the first time this year following the introduction of the largest monetary stimulus by policymakers since the pandemic. Beijing is set to initiate the next stage of its stimulus this week.
Purchasers, encouraged by indications of government expenditure, are beginning to come back. At Jingyue Mansion, a project on the fringes of Shanghai, 188 new apartments, the initial phase of sales, were sold out by late October. “They eased [restrictions], and now we are able to purchase,” stated a buyer named Chen in the shiny showroom, alluding to limitations set in previous years to control soaring prices.
Reviving the property market is essential for President Xi Jinping’s ambitions to rejuvenate strong economic growth in China, which has faced challenges post-pandemic and is currently in danger of falling short of the full-year goal of 5 percent, analysts report. Real estate once represented over a quarter of economic production, but the government restricted the industry in 2020 due to concerns about debt.
The expected fiscal package — alongside the monetary measures announced in September — would represent Beijing’s largest coordinated effort to counter a slowdown that pushed major property developers towards default and weakened confidence in the world’s second-largest economy.
“In the previous three years, the industry has experienced several false starts,” remarked Larry Hu, chief China economist at Macquarie, referencing government assistance initiatives from early 2022, June 2022, early 2023, and May of this year. “Every time the housing market first recovered due to policy easing, it soon weakened afterward.”
There are indications of recovery: last month, sales among China’s 100 largest developers increased compared to last year, and new home prices also edged up. Even with a wave of optimism, discussions conducted by the Financial Times in six cities reveal persistent uncertainties regarding the sector’s future outlook.
Prices for second-hand homes are falling across China
Although certain cities have relaxed buying restrictions to boost sales, such actions tend to be gradual. In Beijing, for instance, non-residents were allowed to purchase properties within the Fifth Ring Road in late September if they had paid taxes in the city for the last three years, reduced from five years before.
In Wuxi, a wealthy city situated under an hour from Shanghai, builders of a government-supported 11-tower project currently underway were anticipated to permit purchasers to sell their residences back to the government for comparable reductions on a new home.
However, “the market currently has very few customers,” stated salesperson Fei Xiaoxing. “Individuals are feeling uncomfortable.”
“Regular folks aren’t making money and are just ‘staying warm and fed,'” he remarked, a phrase often used to signify spending only the essential amount for survival.
In Xi’an, located in central Shaanxi province, a large development currently being built still offers properties for sale 18 months post-launch. After the initial stimulus announcement, 20 apartments were sold in October, in contrast to an average of 10 per month; however, a salesperson noted that the market had been quite challenging and that her salary had been reduced by 40 percent.
“Typically, during the initial month of a project’s launch, one [sales]person has the ability to sell 20 apartments,” she stated. “However, my entire team is now having difficulty selling 20 apartments collectively in one month.”
In China, it has been customary for many people to purchase homes prior to their construction, a practice that makes them susceptible to the downfall of developers.
This has prompted a move towards current properties, where greater market-driven price declines have made purchases more appealing. Information from the China Index Academy indicated that second-hand housing prices in 100 cities decreased by 7.27 percent compared to the previous year in October, marking the steepest decline on record.
October
In Guangzhou, southern China, which fully removed home buying restrictions at the end of September, Dr. Jackie Chen is acquiring his first property, a three-bedroom, pre-owned apartment, for nearly Rmb5mn ($700,000). “In the immediate future, it might be stable, but over time, [the market] will keep declining,” he remarked, highlighting China’s shrinking population. Stimulus actions would merely “prolong the downturn.”
In nearby Foshan, estate agent Zhou Jiafu noted that Guangzhou’s easing of restrictions on purchases by non-residents has negatively impacted smaller cities, where buyers may have sought better deals. “The market has decreased steadily,” he stated. “[The stimulus measures] have no genuine impact, positively or negatively.”
Even in Beijing, several agents indicated that although buyers were coming back, prices had not yet bounced back. In the Haidian district, famous for its universities, properties recently sold for Rmb80,000-Rmb110,000 per square metre, a decrease from a listing price of Rmb140,000 at the year’s end and Rmb200,000 during the peak. “A sales agent stated that certain owners are quite enthusiastic about selling and willing to negotiate.”
Another Beijing agent specializing in high-end properties mentioned that the market was “heating up,” but there were no indications of rising prices. “Numerous individuals are still awaiting,” she stated, “since the policy does not notably affect everyone.”
The announcement of fiscal stimulus by the standing committee of China’s rubber-stamp parliament, the National People’s Congress, is anticipated to focus on land acquisitions and debt refinancing for local governments that heavily depend on land sales for income. However, there is minimal anticipation of actions aimed at households, instead of institutions.
1. What recent changes have boosted China’s property market?
2. Are property prices increasing in China?
3. How are different regions in China affected by the market changes?
4. How has the real estate downturn affected real estate professionals?
5. What impact do new government policies have on the market?
More updates
China’s real estate market is exhibiting evident signs of recovery following considerable difficulties, attributed to focused measures designed to stabilize the industry and revive demand. Essential actions comprise decreasing mortgage interest rates, lowering expenses associated with buying homes, and offering financial assistance to first-time and upgrading homebuyers. Key cities such as Beijing and Shanghai have adopted measures to enhance local markets, leading to an increase in home sales following several months of decrease.
Market confidence has increased, bolstered by government initiatives like the “white list” system, which offers specific financial assistance to real estate initiatives. Funding for these projects is anticipated to surpass 4 trillion yuan by the conclusion of 2024. Experts think that the sector’s rebound is picking up speed, with a focus on quality housing and urban revitalization initiatives enhancing long-term stability.
The government highlights the importance of stabilizing expectations to support economic growth, which is evident in the rise of business activity and optimism among market participants. In the future, building trust and enacting sustainable housing policies will continue to be essential focuses for a robust recovery.
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