The Chinese real estate industry has been persistently sluggish, despite the continuous stimulus measures rolled out by the authorities. Many households currently own two or more properties, leading to predictions about the future challenges these families may face, as shared by professionals in the mainland industry.
In order to boost GDP, the Chinese Communist Party (CCP) has been vigorously stimulating the development of the real estate sector. Under the influence of the CCP, many people invested in real estate a few years ago, leading to abnormal growth in the sector. This resulted in a period of rapid development for the Chinese real estate industry from 2015 to 2019. Soaring property prices prompted real estate companies to aggressively expand their land holdings, resulting in a surge of new projects but also accumulating high levels of housing inventory. Currently, it is apparent that there is an oversupply of residential properties in the Chinese real estate market. According to research data from the People’s Bank of China, over 70% of urban households’ wealth is tied up in real estate, and household debts are primarily from mortgage loans. Data shows that 41.5% of urban households own two or more properties.
After 2020, the CCP began to control the real estate industry, causing significant damage to the sector. As of 2024, property prices in many regions continue to show a downward trend. Simultaneously, investors in real estate are facing decreasing returns on investment as property prices decline, and the value of properties keeps shrinking. The current state of the real estate market has compelled investors to slow down their investment pace and start selling off some of their properties.
Since March 2020, there has been a sharp increase in listings in the Chinese second-hand housing market. By June 2024, the number of listings for second-hand homes in most major first and second-tier cities nationwide had exceeded 100,000 units, with some cities surpassing 150,000 units, and Chongqing (within city limits) reaching over 200,000 units. Investors facing financial constraints are eager to offload their properties, resulting in increased difficulty in completing transactions in the second-hand housing market and an overall decline in market activity.
In response to this, a prominent Chinese real estate columnist and researcher known as “New Property Talk” stated on July 30 that some industry experts believe the golden era when “buying property meant making money” is now a thing of the past. For families who own two or more properties, they may face three major challenges in the future:
Firstly, the difficulty in selling properties has intensified. The reason real estate became a popular investment in the past was its ease of liquidity and being considered a tangible asset. However, with changing perceptions about property ownership, the investment aspect has diminished. In this context, the quality of properties becomes crucial, and the market will face challenges in selling a large supply of low-quality properties. If properties cannot circulate as commodities, their value will be difficult to realize.
Secondly, the rental market for properties is becoming saturated. Investment returns from real estate have mainly come from appreciation and rental income. However, in the future, apart from a few major cities, the demand for renting in most cities may decrease. With an oversupply of housing, rationalization of property prices, and lower barriers to home ownership, direct property purchase is becoming the preference for more people.
Furthermore, the holding costs of properties are rising. In the future, with the increase in property management fees and the implementation of potential property taxes, leasing taxes, and vacancy taxes, the holding costs of properties will continue to rise.
“New Property Talk” believes that Chinese real estate investment is facing dual pressures of declining returns and rising costs. Holding properties in the future may not only be unprofitable but also carry the risk of losses. As for the future trends in property prices, influenced by multiple factors such as policy regulations, economic conditions, and demographic structures, it is difficult to make generalizations. However, based on current trends, the likelihood of significant price increases seems slim.