In the latest update, the Chinese real estate market continues to struggle. New data shows that prices of second-hand homes in one hundred cities have been dropping for 24 consecutive months, with a year-on-year decline reaching 5.38%.
According to a report released by China Index Research Institute on May 1st, the average price of second-hand homes in one hundred cities across the country in April was 14,975 yuan per square meter, a 0.75% decrease from March. This decline has persisted for 24 months with a year-on-year drop of 5.38%.
Despite an increase in transaction volume for second-hand homes in core cities like Shenzhen and Chengdu, the trend of “trading volume for price” continues.
The Institute further analyzed that the overall housing market is currently in an adjustment phase. Post the “April 30th Political Bureau meeting”, it is expected that housing policies will remain accommodative. However, the stabilization of the real estate market still relies on the recovery of market expectations.
On the previous day (April 30th), the Central Committee of the Communist Party of China mentioned the need to “coordinate research to digest existing housing inventory and optimize policy measures for new housing inventory.” This marks the second explicit call for inventory digestion by the communist authorities since the nationwide destocking of the real estate market in 2016. The immense pressure from existing real estate inventory is evident.
Yan Yuejin, the research director of E-House Research Institute, analyzed that existing housing inventory mainly refers to second-hand housing sources. The most significant change in supply and demand dynamics or hot events in real estate in the past two years is the issue of “dramatic increase in second-hand housing listings”, revealing an underlying problem of properties being “difficult to sell”.
Li Yujia, Chief Researcher of the Housing Policy Research Center at the Guangdong Provincial Urban and Rural Planning Institute, stated that the continuous rise in listings of second-hand homes has led to an uncontrollable decline in prices, far exceeding the disclosed data. If this trend continues, market expectations are likely to worsen further, with risks spreading to prudent enterprises and even state-owned enterprises, potentially resulting in a cliff-like decline in the industry and market.
Li Yujia mentioned, “The number of listings and transactions for second-hand homes is greater than that of new homes, and the liquidation cycle is much longer than that of new homes, typically over 3 years in hot cities. The decline in second-hand home prices is also greater than that of new homes, and it has already impacted the pricing system of new homes, forcing developers to adjust prices. The drop in prices also leads to developers refraining from land acquisition and construction, as new homes are challenging to sell. Therefore, the most urgent task is to release a vast amount of second-hand housing inventory.”