The China Index Research Institute published an article stating that since residents' income expectations and expectations of falling housing prices have not improved significantly, it is expected that in the second half of 2024, the national real estate market will still face adjustment pressure, and the new housing market may still be bottoming out. Under optimistic expectations, the sales area of newly built commercial housing in the country in the second half of the year was basically the same as the same period last year, with a year-on-year decrease of about 10%; under neutral expectations, the sales area of newly built commercial housing for the whole year may drop 14.9% year on year; under pessimistic expectations, the annual sales area fell by about 18%. On the supply side, the downward trend in new construction space is difficult to change. The year-on-year decline is still large for the whole year; the year-on-year decline in real estate development investment may narrow in the second half of the year due to the low base effect, but investment performance for the whole year is still expected to be weak. Further implementation of policies such as the “white list” of projects may provide some support for investment.

Since 2024, the national new housing market has continued to adjust its overall trend. Driven by “price for volume,” the second-hand housing market has maintained a certain scale of transactions, but the overall downward pressure on real estate is still strong. In this context, the April 30 Politburo meeting set the direction of property market policy, and proposed “comprehensive research on policies and measures to absorb existing properties and optimize incremental housing”. The 5.17 new real estate “package” policy focuses on stabilizing the market and removing inventory. The 6.7 National Standing Committee once again made it clear that “the digestion and revitalization of existing real estate and land must not only liberate minds and broaden ideas, but also be firmly grasped and carried forward.” Second-hand housing transactions in some core cities improved first after implementing a number of policies, but the overall new housing market has not improved significantly, and it will still take time for the policies to take effect.

1) Housing prices: From January to May 2024, the “price for volume” trend in the second-hand housing market continued. Second-hand housing prices in Baicheng fell by a cumulative total of 2.91%, and the number of cities with a month-on-month decline has exceeded 90 for 12 consecutive months; driven by the entry of improved real estate into the market, new housing prices in Baicheng increased by 1.09%.

2) Market supply and demand: In the first half of the year, sales of new homes were weak. The sales area of newly built commercial residential homes in 100 key cities fell by about 40% year on year. In June, due to base decline and the effects of superimposed policies, the year-on-year decline in transaction area narrowed to about 20%. In January-May, the number of second-hand housing units sold in key cities fell 13% year on year. Since June (6.3-6.23), the average weekly number of second-hand housing units sold has increased by about 20% year on year. The market performance is clearly superior to that of new homes. The effects of policies in cities such as Shanghai, Shenzhen, and Hangzhou are obvious. Among them, Shanghai has signed more than 1,000 second-hand housing units online in many days since June.

3) Land market: In the first half of the year, the supply and demand for residential land in 300 cities across the country fell by more than 30% year on year, entering the second quarter. Due to the scarcity of high-quality land plots, the desire of superimposed housing enterprises to acquire land has not yet been repaired. Most land was sold at reserve prices, and market sentiment was lower than in the first quarter. Local auction rules continue to be optimized. In June, Shanghai lifted the upper limit of 10% premium rate for local auctions, and Beijing raised the upper limit of the premium rate for some plots. In terms of land acquisition enterprises, the main land acquisition force in core cities is still central state-owned enterprises, and Fuzhou and Zhengzhou still account for a high share of local state-owned assets.

4) Policy outlook: Macroeconomic policies may further strengthen economic stabilization in the second half of the year. Real estate policies are expected to focus on “stabilizing the market” and “removing inventory,” and supporting policies are expected to continue to be optimized and implemented. In terms of stabilizing the market, some cities are still expected to continue to lower mortgage interest rates and lower transaction taxes, and there is still room for optimization of first-tier city purchase restriction policies. At the same time, supporting policies to promote the construction of “good houses” are also expected to continue to be improved, leading to the release of demand for improved housing. In terms of inventory removal, state-owned enterprises in various regions are expected to enter the actual implementation stage. At the same time, the “trade-in” model for state-owned enterprises such as Nanjing and Zhengzhou may be promoted. Furthermore, policies to revitalize existing land stocks through take-back and acquisition are also expected to progress.

5) Market outlook: Since residents' income expectations and housing price expectations have not improved significantly, it is expected that in the second half of 2024, the national real estate market will still face adjustment pressure, and the new housing market may still be bottoming out. Under optimistic expectations, the sales area of newly built commercial housing in the country in the second half of the year was basically the same as the same period last year, with a year-on-year decrease of about 10%; under neutral expectations, the sales area of newly built commercial housing for the whole year may drop 14.9% year on year; under pessimistic expectations, the annual sales area fell by about 18%. On the supply side, the downward trend in new construction space is difficult to change. The year-on-year decline is still large for the whole year; the year-on-year decline in real estate development investment may narrow in the second half of the year due to the low base effect, but investment performance for the whole year is still expected to be weak. Further implementation of policies such as the “white list” of projects may provide some support for investment.

Editor/Jeffrey