Policy boost: China’s real estate market sees signs of revival

Supportive measures drive improvement in home sales, signalling potential market stabilisation

China’s residential real estate market, which has been in a downturn for three years, is showing signs of recovery due to recent government interventions. These measures, aimed at reviving the struggling sector, include purchasing unsold homes and easing home-buying rules in major cities like Shanghai, Shenzhen, and Guangzhou. 

Government initiatives and market response 

In mid-May, the central government announced initiatives to help stabilise the housing market. Local authorities were encouraged to purchase unsold homes and new policies were introduced to make home-buying more accessible. For instance, downpayment requirements were slashed, and mortgage terms were made more favourable. These changes have begun to resonate, with home sales transactions gaining 3.4 percent from April. 

According to the Global Times, nearly 60 percent of the top 100 developers saw their home sales values increase month-on-month in June. The sales values of the top 100 developers reached USD60.39 billion (CNY438.93 billion), up 36.3 percent from May, indicating a positive response to the new policies. 

Easing policies in major cities 

Beijing joined other first-tier cities like Shanghai in easing home-buying policies, which has sent positive signals throughout the property sector. On June 26, Beijing announced supportive policies, including lowering the minimum downpayment ratio for first-time homebuyers from 30 to 20 percent. This move has significantly boosted daily trade volumes in previously owned properties, surpassing the benchmark of 500 transactions per day. 

These changes reflect a broader trend across China, where the relaxation of housing policies since April has encouraged many previously hesitant homebuyers to enter the market. The National Bureau of Statistics (NBS) spokesperson, Liu Aihua, noted that the decline in sales of new homes narrowed in the first five months of the year, showing positive momentum. 

Ken Ip, Chairman of the Asia MarTech Society and Chairperson of the PropertyGuru Asia Property Awards (Mainland China) judges, told Property Report by PropertyGuru that China’s housing slump is showing signs of slowing down. He said: “Government efforts like easier down payments and buying unsold units are making property more accessible and reducing excess inventory. This, along with a confidence boost from the government’s actions, might be attracting cautious buyers back into the market.” 

To be able to sustain progress, he suggested going with a more measured approach. “Gradual policy adjustments are crucial to avoid disrupting the fragile recovery. Policies targeting affordable housing could broaden the buyer pool, while encouraging investment in other sectors lessens reliance on real estate. Finally, transparency and consistent policies will rebuild trust and encourage long-term market participation.  

External factors like the overall economy will still influence recovery, but the slowdown in the decline suggests a potential for a more stable future for China’s property market. The market might find a new, sustainable equilibrium in the coming quarters.” 

Financial support and economic outlook 

The People’s Bank of China is providing USD41.3 billion to address the inventory overhang, as the country grapples with approximately 60 million unsold apartments. This financial injection is expected to aid developers and stimulate the market, although Moody’s Ratings analysts caution that a sustainable sales improvement is unlikely given the modest economic growth outlook. 

Yet, Ken Ip is optimistic, emphasising the importance of the government’s strategy for long-term stability. 

“China’s recent property market stimulus package, while not sparking the immediate market surge seen in previous rounds, is laying the groundwork for a more sustainable future. Unlike the credit-fueled boom of 2015, these measures, including lower down payments, aim to encourage healthy market participation. Consumer confidence is cautiously returning, and the focus on reducing excess inventory is a welcome shift,” Ip said. He said that these measures aim to encourage healthy market participation and consumer confidence, focusing on reducing excess inventory and financial responsibility. 

He added: “By offering incentives like favourable loans, they aim to attract buyers without resorting to excessive market manipulation. This is evident in the recent policy directive for cities to loosen restrictions, empowering developers with more pricing autonomy.  

This commitment to a market-driven approach, alongside a focus on financial responsibility for developers and local governments, suggests a measured and responsible long-term vision. While the full impact of the policies is yet to be seen, analysts predict a gradual return to stability within the next year, with the market finding a new, healthy equilibrium.”

Meanwhile, economists surveyed by Bloomberg agree, anticipating a modest boost to China’s GDP from the recent property market support, with growth expected to improve by between 0.1 and 0.3 percentage points this year. The median forecast for growth in 2024 has edged up to 4.9 percent, reflecting cautious optimism about the impact of these policies. 

Zhou Maohua, an economist at China Everbright Bank, also noted that supportive policies will gradually take effect, tailoured to fit the circumstances in individual cities. This approach is expected to shore up confidence and foster an industry-wide recovery, although time is needed for a full rebalance of supply and demand. 

Celebrating excellence 

Amid these market shifts, the 10th edition of the PropertyGuru Asia Property Awards (Mainland China, Hong Kong, Macau) celebrated outstanding achievements in the real estate sector in 2023. New World China was named Best Developer (Mainland China), with development winners including Zhuhai Huafa Properties Co., Ltd. for Zhuhai Huafa Sky Hill Mansion and Shanghai Huafa Jing’an Mansion; Shun Tak Qiantan (Shanghai) Cultural and Real Estate Company Limited for New Bund 31; and Lead8 for MixC Nanjing. 

Chinese real estate market is beginning to show signs of recovery due to targeted government support. While challenges remain, these initial green shoots suggest that the sector may be stabilising. Continued policy adjustments and a focus on sustainable growth are essential to maintaining this positive momentum and ensuring long-term stability in the market.

Know of any award-worthy residential, commercial, or industrial projects in the country? Nominate them for the 11th annual PropertyGuru Asia Property Awards (Mainland China) on or before 13 Sept 2024. To know more, visit AsiaPropertyAwards.com/Award/MainlandChina/. 

Gynen Kyra Toriano, Digital Content Manager at PropertyGuru, wrote this article. For more information, email: [email protected].