No relief yet for China’s housing market with excess supply in secondary market, weak price guidance in new projects
- China remains ‘not too concerned’ about the property sector’s downturn, given the negative policy tone at ‘two sessions’ gathering: Nomura
- China Overseas Land recently priced a new Beijing project below the going rate in the secondary market in the same area, agents say
Listings of lived-in homes in 14 major mainland cities rose 57 per cent in February from a year earlier, according to a report published by online property agency Zhuge Zhaofang on March 7. The number has risen for 18 consecutive months from year-earlier data, it added.
The trend is consistent with data on the broader residential market. New listings of second-hand homes in 100 cities rose by 4.82 million units per month on average last year, according to data compiled by 58Anjuke, an online real-estate brokerage. That worked out to a 12 per cent jump on average over 2022, it added.
The oversupply situation may not ease soon without a stronger policy intervention. China remains “not too concerned” about the property sector malaise, analysts at Nomura Holdings said in a March 10 report when assessing the tone at the “two sessions” in Beijing. The industry fundamentals will remain under pressure with limited policy support, the Japanese brokerage said.
02:40
Chinese Premier Li Qiang delivers his first work report amid concerns about state of the economy
“A surge in the listings of second-hand homes in recent years have affected prices of new homes, especially in tier-one cities,” said Guan Rongxue, a senior analyst with Zhuge Real Estate Data Research Centre, a unit of Zhuge Zhaofang. Sales of used homes will usurp demand for new homes, she added.
Chinese investors offloaded US$31.7 billion of US property over last 5 years
Homeowners have had to slash prices by as much as 20 per cent to attract buyers, according to You Liangzhou, the owner of Baonuo, a Shanghai property agency. In one example, an owner managed to sell his unit at Oriental City Garden in Beijing last month after lowering his asking price to 8.98 million yuan (US$1.25 million) from 10.8 million yuan.
10:57
Boom, bust and borrow: Has China’s housing market tanked?
A unit at Shimao Riviera Garden in Shanghai changed hands last week at 27 million yuan after a 10 per cent price cut, while another deal for a flat in Shanghai Lvcheng is being closed after a 1.3 million yuan or 12 per cent discount, You added.
As a result, prices in both primary and secondary markets have continued to slide into the new year. Prices for newly built homes in 70 major Chinese cities fell 0.37 per cent in January from a month earlier, while second-hand home prices dropped 0.68 per cent, according to government data.
“As for now, homeowners and agents prefer a ‘price for volume’ strategy, leading to some buyers entering into the second-hand home market,” said Chen Wenjing, director of market research at China Index Academy.
Chinese home sellers turn to social media to boost their chances in weak market
Transactions in the secondary market jumped 34 per cent in 2023, according to China Index Academy. Deals involving new homes, which fell 1.4 per cent last year, slumped 46 per cent in the first two months of 2024 from the same period in 2023, it added, despite Beijing’s measures to lower down payment ratios for first-time buyers in tier-one cities.
Meanwhile, some new projects were launched with indicative prices lower than second-hand homes of the same kind, according to agents and analysts. For instance, China Overseas Land and Investment recently launched a project in Beijing below the price in the secondary market for similar type and size in the same district.
“When buyers pick up second-hand homes in these rigid market conditions, there could also be emerging demand for upgrading to new homes,” Chen of China Index Academy said. “This would shore up the market for new homes, but it will take time.”
