The credit rating agency Fitch Ratings indicates that the outlook for the real estate development industry next year is "low prosperity and stability." The agency mentioned that the domestic real estate industry is showing a clear short-term market recovery under the framework of "stopping the decline and stabilizing," while long-term stabilization still relies on a combination of policy measures that take time to achieve. In a neutral scenario, it is expected that industry sales will gradually stabilize and recover by the fourth quarter of 2025, with the year-on-year decline narrowing to below 5%; in an optimistic scenario, it is anticipated that the sales area in 2025 may return to year-on-year parity.

Fitch Ratings stated that in the first three quarters of this year, under a more complex and challenging economic environment, the effectiveness of real estate policies has been insufficient. While the sales decline has narrowed, stability has not yet been achieved. Since the end of September, under the combined effect of a series of policy measures, positive signals in the market have become apparent. Fitch Ratings projects a decline in real estate sales area of about 13% in 2024, and a decrease in sales amount of about 18%, both further narrowing compared to the first ten months.

Additionally, Fitch Ratings believes that the overall downward trend in new home prices has continued to expand in the first ten months of this year, although the rate of decline has slowed. Regarding second-hand houses, the current listing volume remains high, and buyers have strong bargaining power, leading to the expectation that the downward trend in second-hand housing prices will continue in the short term.

The agency pointed out that since 2024, profitability in the real estate industry has continued to plunge. Revenue and net profit for 19 sample housing enterprises continue to decline, with losses further deepening. Among them, 6 companies recorded positive revenue growth, namely China Res Land (01109.HK), China Merchants Shekou Industrial Zone Holdings, CCCC Real Estate, Greentown China (03900.HK), Jianfa International (01908.HK), and Yuexiu Property (00123.HK); and 2 recorded positive net profit growth, namely Jianfa International and China Jinmao (00817.HK). Fitch Ratings expects that given the industry sales have not shown a significant turning point, the profitability of the sample housing enterprises will continue to decline throughout 2024, with projected reductions in revenue and net profit of approximately 6% and around 70%, respectively. In 2025, accompanied by gradual stabilization and recovery in the industry, central state-owned enterprises are expected to leverage their brand and financing advantages, with sales and profitability improvements expected to outperform the industry average.

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