China’s property-market recovery ‘uncertain’ as investment remains weak despite surge in first-quarter home sales

Property development investment dropped 5.8 per cent year on year to 2.6 trillion yuan (US$377.8 billion) in the first quarter

Overall property sales rose 4.1 per cent year on year in the quarter, and new-homes sales shot up 7.1 per cent, according to government data

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New homes stand behind the construction site of a new subway station in Beijing on April 18, 2023. Photo: Reuters

Published: 2:00pm, 18 Apr 2023

Investment in property development in China declined in the first quarter of 2023, extending a year-long slump as developers backed off on new-home construction despite a jump in sales, indicating that recovery for the vast and economically crucial market remains fitful.

Property development investment dropped 5.8 per cent year on year to 2.6 trillion yuan (US$377.8 billion) in the first quarter, slightly worse than a 5.7 per cent loss recorded during the first two months, according to data released by the National Bureau of Statistics (NBS) on Tuesday. Residential investment was 1,976.7 billion yuan, a decrease of 4.1 per cent.

Property investment has been in decline year on year since the first quarter of 2022, which saw a 0.7 per cent increase. For the full year, it plunged 10 per cent, recording its first double-digit decline. This prompted analysts to predict the housing market would play a more diminished role in fuelling broader Chinese economic growth than it has over the past decade.

The continuing decline in investment shows “uncertainty” in the recovery, said Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution.

Residential buildings under construction in Beijing on March 4, 2023. Photo: Bloomberg

That uncertainty persists even as property sales rose 4.1 per cent year on year to 3.05 trillion yuan during the first three months, compared with a 0.1 per cent decline in January and February, according to the NBS. New homes sales were particularly strong, shooting up 7.1 per cent.

“Recovery is mainly in higher-tier cities, while other cities remain weak,” Yan said. “There needs to be more housing easing and support for developers to pull the curve up.”