The residential market “in Tier-1 cities is expected to take the lead in market stabilisation and recovery in 2024," Cushman and Wakefield's Brodie said. — China Daily
SHANGHAI: China’s real estate market saw unprecedented adjustments and changes last year, and experts say they expect 2024 to be a year of recovery, propelled by supportive policies and increased investor confidence as it explores a new development model.
Shaun Brodie, head of research at real estate services firm Cushman and Wakefield, said the residential market “in Tier-1 cities is expected to take the lead in market stabilisation and recovery in 2024, which will be gradually seen in Tier-2 and Tier-3 cities”.
Meanwhile, government regulations of the residential market will focus on long-term mechanisms, aimed at avoiding excessive volatility and maintain stable market development, Brodie said.
Property consultant JLL China said “timely” policy adjustments should consolidate the recovery momentum of the sector.
“Policymakers have clearly noted that a significant change has taken place in the real estate market’s supply-demand relationship, and in order to adapt to the new situation, policy adjustments and optimisations should be made in a timely manner,” said Bruce Pang, chief economist at JLL China.
The measures should come after a study and judgment of major trends and structural changes in the real estate market, as well as the urbanisation pattern, while efforts should be made to eliminate negative effects – such as high debt and high leveraging – that have accompanied the previous property development model.
Hui Jianqiang, head of research at Beijing Zhongfang-Yanxie Technology Service Ltd, said a meeting of the Political Bureau of the Communist Party of the China Central Committee held on July 24, 2023, had sent out a clear signal and a raft of measures.
The meeting, which analysed the economic situation, called for efforts to prevent and defuse risks in key areas and adapt to the major changes that have taken place in the relationship between supply and demand in China’s real estate market.
Real estate policies should be adjusted and optimised in a timely manner, the meeting said, and added that the policy toolkit should be utilised with city-specific measures to better meet residents’ demand and their needs for better housing, as well as advance the stable and sound development of the property market.
As many as 751 policy easing measures were issued by local governments, covering more than 330 cities across China as of Dec 18, over 140 more than in 2022.
The easing measures peaked in September, with more than 140 such announcements, according to data collected by the Zhuge Real Estate Data Research Centre.
The measures included reducing down payment ratios, lowering mortgage interest rates, encouraging commercial banks and borrowers to negotiate more favourable interest rates, providing financial support to ensure the timely delivery of property projects and giving financial support to local governments’ low rental housing, among others, said Guan Rongxue, a senior analyst at Zhuge Real Estate Data Research Centre.
Guan said these measures reached a new level in December with the nation’s two biggest cities, Beijing and Shanghai, announcing adjustments to their existing home purchase policies in favour of home trading on Dec 14.
The optimisation measures, like lowering down payment ratios, cutting mortgage interest rates and optimising the definition of ordinary housing, will bolster the home market in the two cities and boost overall market confidence, helping to promote the stabilisation of the Chinese housing market, said Chen Wenjing, director of research at the China Index Academy.
“The series of measures has gradually paid off, and there are already some positive signs emerging,” said Pan Gongsheng, governor of the People’s Bank of China, at a conference in Hong Kong in late November.
“Overall, China’s real estate industry is looking for a new balance
“The property market’s current adjustment will be beneficial to China’s economic growth and sustainable development over the long term,” Pan added.
The property industry has broadly echoed Pan’s views.
“The latest macro data suggest that some major indicators of the real estate market have indeed continued to show signs of marginal improvement recently,” said Pang of JLL China.
“It must also be noted, though, that the growth rate of real estate investment continues to decline and the decline in sales continues to expand, indicating that the real estate market is still at a stage of bottoming out.
“While waiting for the policies to take effect, confidence and patience are also imperative before any further improvement in the real estate market,” Pang added.
According to the National Bureau of Statistics (NBS), property investment fell 9.4% in the first 11 months of 2023 compared with a year earlier, while in the first 10 months, it declined by 9.3%.
During the same period, commercial housing sales fell 8% year-on-year in terms of floor area, extending the downward trend by 0.2 percentage points, NBS data showed.
“Despite market changes, as a real estate service provider, we always focus on meeting the needs of consumers and solving problems in home transactions,” said Wang Yongqun, chief operating officer of real estate broker Lianjia.
For example, as residential consumption becomes more service-oriented, safety has become a primary concern, Wang added.
As per a recent S&P report, both market sentiment and prices in China’s property market are starting to become normalised.
S&P said that the Chinese property market has bottomed out.
From a long-term perspective, the real estate sector will strike a new balance between supply and demand that adapts to the current market scale, given the top-level policy guidance and actual market demand, S&P Global (China) Ratings said in a report dated Nov 24.
Chen Sheng, president of the China Real Estate Data Academy, said anticipation was the keyword of the property market in 2023.
Chen said that despite all the challenges, the spirit of “never giving up” led various parties, the government, industry players, property developers and consumers, to work together in the hope of stabilising the market and aiding in its recovery.
“Such a spirit will carry on in 2024 and bring about positive changes in the property market,” Chen said.
The tone-setting Central Economic Work Conference held in December sent out positive signals that further measures will be introduced to stabilise the sector, he added.
Meanwhile, requirements for the future development of the real estate industry have been put forward, to guide the industry as it accelerates towards a new development path in the mid to long-term.
The conference called for efforts to defuse risks in the property sector, equal treatment toward reasonable financing needs of real estate companies regardless of ownership, treating equally different kinds of ownership and the building of a new development model for the industry.
Based on the existing status of the real estate market, measures introduced by central and local governments, and the intent of the Central Economic Work Conference, Pang said he expects the real estate market to stabilise in 2024.
With the formation of a virtuous cycle of finance and real estate and the establishment of a new property development pattern, the property market can show stable and healthy development, he added.
“We think the government will continue to implement measures to stabilise the property market, improve expectations and meet the reasonable financing needs of property developers,” Pang said.
The property sector remains a pillar industry of the Chinese economy.
The policy stance has shifted to supporting the property sector as a stabiliser and growth driver of the Chinese economy, preventing it from becoming a drag on the economy.
Brodie said he expects support for the residential market to be strengthened in 2024 and more policy concessions and safeguards used to promote the healthy development of the residential market.
“It is expected that the house purchase policies within Tier-1 cities and Tier-2 hotspot cities will continue to be adjusted and optimised.
It is also expected that the construction and development of affordable housing will be further accelerated. In addition, the long-term rental housing market and real estate investment trusts should continue to develop,” said Brodie. — China Daily/ANN
