China's Property Market Reform Efforts Show Limited Impact
Chinese Real Estate Market Continues to Decline Amid Relaxed Policies
In May 2024, several cities in China implemented relaxed real estate market control policies aimed at stimulating the housing market. However, according to data released by the National Bureau of Statistics on June 17, the effects of these measures have not yet materialized. The data indicated a continued decline in housing prices nationwide, with both new and second-hand housing prices dropping month-over-month. Among 70 large and medium-sized cities, only Shanghai and Taiyuan saw a slight increase in new housing prices, while the rest experienced decreases.
Despite the relaxation of policies, such as the easing of housing purchase restrictions in Shanghai from "five changes to three" and the removal of restrictions on purchasing houses after divorce in Guangzhou, the market response has been subdued. The nationwide housing prices hit a new low for the second consecutive month, with a further decline in the selling prices of new and second-hand residential properties by 0.7% and 1% in May following the 0.6% and 0.9% drops in April.
Key Takeaways
- Despite the relaxation of real estate market control policies in May, housing prices continued to decline nationwide, with second-hand housing prices falling month-over-month in 70 cities.
- Only Shanghai and Taiyuan saw a slight increase in new housing prices month-over-month, while other cities experienced decreases.
- In April and May, the declines in selling prices of new and second-hand residential properties reached a new low.
- Some cities attempted to activate the rental market through financial subsidies, but the recovery of the new housing market fell short of expectations.
- The real estate market is shifting towards the second-hand housing market at an accelerated pace, and new housing purchase restrictions were relaxed in many areas.
Analysis
The relaxation of China's real estate market control policies has failed to immediately boost the market, reflecting insufficient consumer confidence and purchasing power, which may lead to increased financial pressure on real estate developers in the short term, affecting their investment and new project development capabilities. In the long term, if the market adjustment persists, it may prompt the government to further relax policies or provide financial support to avoid economic downturn pressure. Simultaneously, the accelerated transformation of the second-hand housing market may alter the structure of the real estate market, reducing reliance on the new housing market and impacting related industry chains and employment.
Did You Know?
- Relaxation of Real Estate Market Control Policies: This refers to the government's reduction or adjustment of existing restrictive policies, such as purchase eligibility restrictions and loan rate controls, in order to promote market activity and transaction volume in the real estate market.
- Month-over-Month Housing Prices: Month-over-Month refers to the change in prices compared to the previous statistical period (usually the previous month). Month-over-Month new housing prices refer to the changes in the average selling prices of new residential properties compared to the previous month, while month-over-month second-hand housing prices refer to the changes in the average selling prices of second-hand residential properties compared to the previous month.
- Purchase Restriction Policies: These are government policies that restrict the quantity and eligibility of homebuyers in order to control housing prices and prevent real estate bubbles. Examples include restrictions on non-local residents purchasing homes and limitations on the purchase of second or subsequent properties.