Fitch Ratings report indicates that mainland real estate developers are expected to continue facing challenges in 2025, with predicted decline in the value of new building sales by 15% to around 7.3 trillion yuan, mainly due to a 10% decrease in sales area and a 5% decrease in average selling price. In addition, the bank also expects that the long-term average annual demand for new residences from 2024 to 2040 will reach a building area of 0.8 billion square meters, with private residential supply reaching 0.6 billion square meters each year. Cities with good economic prospects and relaxed purchase restrictions may perform better.

The report indicates that the mainland government has introduced new support policies to stabilize the recent market sentiment, but the sustainability of short-term recovery is highly uncertain, as the industry still faces structural issues including high unsold housing inventory, uncertain employment situation, and low housing affordability. Low residential rental yields compared to mortgage rates also indicate further average price pressure.

In the report, Fitch mentioned that half of the issuers of mainland real estate developers it rated have a negative outlook. Despite a decrease in rating downgrades, real estate developers including state-owned enterprises still face pressures on sales, profit margins, and cash generation. The negative outlook reflects risks of industry and company sales instability despite government support. (vc/k)

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