The Chinese Ministry of Housing and Urban-Rural Development and five other departments recently held a meeting stating that they will continue to promote the stabilization of the real estate market next year, but no new policies will be introduced. The effects of existing policies are weakening. In recent days, the A-share real estate sector has continued to plummet, with state-owned enterprise Vanke teetering on the edge of default. Analysts point out that the Chinese real estate industry has yet to emerge from years of stagnation, and the tough times in the Chinese property market are far from over.
According to Bloomberg, as China’s real estate debt crisis enters its fifth year, the property market has not yet recovered from years of stagnation. Potential buyers’ confidence has been shaken, with property prices plummeting and millions of unfinished homes.
Economists believe that both housing prices and sales volume in China will decline next year. The most optimistic forecast is that the decline may be slower than in 2024.
The pessimistic outlook indicates that the recent surge in property developers’ stock prices may be short-lived. Bloomberg Index shows that as of December 23, the industry’s stock prices rose by about 2.5% for the year, after four consecutive years of decline. However, this upward trend (driven by past stimulus measures) has started to lose momentum, indicating that the tough times are far from over.
On Wednesday, December 25th, the A-share market’s real estate sector experienced a downward shock. China SCE Group Holdings fell by over 9%, followed by Sunac China Holdings dropping by over 7%, and ShenZhen Zhenye Real Estate Group by over 6%. Nan Guo Real Estate, Rongfeng Holdings, and several other companies also experienced declines in their stock prices.
Prior to this, the performance of the A-share real estate sector has been lackluster, with Rongfeng Holdings hitting a limit-down on Monday, December 23, reaching a new low in nearly two months. Stocks such as Nan Guo Real Estate, Sunshine 100 China, Wonderland Real Estate, Bright Real Estate, and Market North High-tech all saw declines exceeding 5%.
In the past week (December 16th to December 20th), state-owned Vanke A accumulated a 7.02% decline, with the Shenzhen Component Index real estate development sector falling by 5.12%.
Analysts from Morgan Stanley stated that the recovery of Chinese developers’ stock prices may depend on continued sales growth, but this seems distant. It is projected that next year’s real estate sales will decline by 12%, with property prices falling by high single-digit percentages compared to November this year. Fitch Ratings predicts that next year’s property prices will drop by 5%, and new home sales area will decrease by 10%.
Since the end of September’s Central Committee meeting of the Chinese Communist Party, the Ministry of Housing and Urban-Rural Development meeting on October 17, and the Central Economic Work Conference in December have repeatedly emphasized the need for the real estate industry to “stabilize and stop falling.” They have released a series of stimulus policies, but based on the industry data from November, the policies have not had the intended effect of stabilization and resurgence; instead, the market continues to decline.
According to data released by the National Bureau of Statistics on December 15, in November, China’s new housing prices fell for the fifth consecutive month. Among 70 large and medium-sized cities, 59 experienced a month-on-month decline in new housing prices.
In the first 11 months of this year, national real estate investment declined by 10.4% year-on-year. New commercial housing sales area decreased by 14.3%, sales revenue dropped by 19.2%. Additionally, the area of unsold commercial housing increased by 12.1%. The newly started and completed area of houses decreased by 23% and 26.2%, respectively.
From December 24th to 25th, the Ministry of Housing and Urban-Rural Development, in conjunction with the Ministry of Finance and five other departments, held the “National Housing and Urban-Rural Construction Work Conference” in Beijing. They announced that next year they will continue to promote the “stabilization and recovery of the real estate market,” with the main policies including “four cancellations, four reductions, and two increases.”
The “four cancellations” refer to the cancellation of restrictive measures, such as “home purchase restrictions, sales restrictions, price restrictions, and differential tax policies for ordinary and non-ordinary residential properties.” The “four reductions” involve reducing down payment ratios, lowering interest rates on existing loans, decreasing housing provident fund loan rates, and lowering the tax burden on “selling old homes and buying new ones.”
These policies have actually been gradually implemented since May and September of this year and are not new real estate policies.
Among the “two increases,” the credit scale for the “white list” has been increased to 4 trillion yuan, a policy that started during the Ministry of Housing and Urban-Rural Development press conference on October 17. However, in December, the property development company, Tahoe Group, was listed as untrustworthy, and “model student” Vanke is on the brink of default, indicating policy failures.
The Yangcheng Evening News reported that the Guangzhou Yue Xiu District Court listed Tahoe Group, one of the “Five Tigers of South China,” as an untrustworthy person on December 17. As of October 31, 2024, Tahoe Group had overdue interest-bearing debts totaling 35.196 billion yuan. From 2021 to the first half of 2024, Tahoe Group accumulated a net loss of 54.7 billion yuan.
Last week, Vanke’s US dollar bonds due in May 2025 fell by about 10 cents to around 80 cents, marking the largest weekly decline in over a year. The bonds due in 2027 fell to 49 cents, reflecting investors’ concerns about full repayment.
Sources familiar with the matter recently told Bloomberg that the China Banking and Insurance Regulatory Commission (CBIRC) asked several of the largest insurance companies in China to report their financial risk exposure to Vanke Enterprise Limited to assess how much support the developer would need to avoid default.
Vanke is one of the few struggling real estate developers in China that has not yet defaulted. Data from Tianyancha shows that the largest shareholder of Vanke, Shenzhen Metro, is 100% owned by the Shenzhen State-owned Assets Supervision and Administration Commission.
According to S&P’s statistics, in the past three years from 2021 to 2023, more than 50 real estate enterprises have defaulted or been unable to repay their debts.
A review by the Epoch Times found that real estate companies that defaulted on their debts this year include, but are not limited to, Country Garden, Jinke Group, Logan Property Holdings, Dimah Group, Greentown China, and Tahoe Group.
Regarding the implementation of one million units of urban village and dilapidated housing renovations, Wang Guochen, a researcher at the First Institute of the Institute of Economics, Chinat Institute of China, told Voice of America that it is not the right solution.
He said, “In fact, there is already an oversupply of housing in mainland China. Continuing to build urban villages and renovate old buildings means adding more supply. Why not use the same money to purchase unfinished buildings that can immediately be used as public housing?”
“Chief Business Review,” a self-media commentator, believes that housing prices in 2025 are unlikely to rise because all the previous logic for rising prices no longer exists.
Firstly, the demographic dividend has disappeared; secondly, urbanization in China has basically stalled; thirdly, due to the economic downturn in China, the essential need to buy a house lacks confidence in the future, severely constraining demand; fourthly, as housing prices are unlikely to increase significantly, rental income is also declining, and the appeal of real estate as an investment has diminished.