Best way forward for property recovery high on agenda

Chinese economists assessed whether the real estate sector’s decline has halted, focusing on stabilization and recovery drivers. They determined that sales growth typically precedes price increases, with historical data showing commercial housing sales growth leading price rises by four months in major cities. Potential housing demand in China peaked at 1.78 billion sq m in 2017 but is projected to decline to 1 billion sq m by 2025 and 300 million sq m by 2050, influenced by urbanization and aging stock. The first nine months of 2024 saw residential sales at 770 million sq m, below the full-year potential demand of 1.04 billion sq m, suggesting the market may stabilize. Experts emphasized that rising consumer purchasing power—driven by increased savings and reduced homebuying costs—could support stabilization. However, household expectations for price declines and income uncertainty remain key hurdles to unlocking demand. The analysis also addressed balancing new property supply with local government fiscal needs, as revenue from land sales remains critical. While pre-owned home prices in China’s 70 largest cities dropped 15% by September 2024, experts argued that long-term income stability is essential to restore buyer confidence. The sector’s adjustments since 2021 have been severe, with annual housing sales halving and development investment declining significantly before recent supportive measures were introduced. Demand trends are uneven, shaped by urbanization, lifestyle upgrades, and policy restrictions on mortgages. The experts concluded that current adjustments may be nearing an end, but sustained recovery depends on aligning supply, demand, and fiscal policies to ensure stability.