Recent steps taken by the Chinese government to rejuvenate the country’s struggling real estate market appear to have generated immediate positive results, judging by the sharp increase in housing sales and buyer interest observed during China’s National Day holiday. However, whether this rebound can be sustained in the longer term remains to be seen, as experts caution that deeper economic challenges could dampen the recovery.
The week-long holiday, a key period for consumer activity in China, saw significant movement in the real estate sector. According to data from China Index Academy, average daily sales by area in 25 cities increased by 23% compared to the same period last year, after adjusting for seasonal factors. The true extent of the sales boom might be even greater, as the Academy noted that many online transactions had not yet been tallied.
Cities that rolled out promotions for residential projects experienced a surge in prospective homebuyer visits, with foot traffic increasing by at least 50% year-over-year, according to a report by China Central Television (CCTV), citing the Ministry of Housing and Urban-Rural Development. In an effort to boost demand, around 130 cities across 20 provinces offered various incentives and perks to entice buyers.
These perks included lower downpayment requirements, cuts to existing mortgage rates, and, in some cities like Beijing and Shanghai, widened eligibility for property purchases. As a result, several first-tier cities, which have seen some of the sharpest drops in home prices over the past year, experienced a surge in interest. In Beijing, expressions of intent to purchase new homes doubled during the first three days of the holiday. In Shenzhen, new-home sales skyrocketed, increasing by more than tenfold in the first six days of October, while transactions in the second-hand property market tripled.
The burst of activity followed closely on the heels of policy announcements made by the Chinese authorities aimed at stabilizing the real estate sector. These measures included lowering mortgage rates and easing downpayment requirements for second-home buyers, a significant move given that many potential buyers have been priced out of the market due to tight lending conditions and high downpayment thresholds in recent years.
Additionally, at the local level, major cities like Beijing and Shanghai broadened the eligibility criteria for purchasing properties, which opened the market to more buyers. This was a particularly important step for these cities, where home prices have been among the most unaffordable, contributing to the overall slowdown in housing demand.
“Results in the core cities have surpassed expectations during the holiday, and we expect a significant growth in October sales data,” noted analysts at China Index Academy. They also hinted at the possibility of further easing measures in Beijing, Shanghai, and Shenzhen, while lower-tier cities may consider increasing subsidies to further support the market.
Real estate agents in Shanghai, responding to the sudden surge in interest, even implemented a “no closing hour” policy, keeping their offices open round-the-clock to accommodate the rising number of visitors. In Shenzhen, some buyers were reportedly so eager to secure a property that they paid deposits without even viewing the apartments in person, highlighting the pent-up demand for homes in the city.
Despite the flurry of activity in the housing market, Chinese developer shares reflected a more cautious sentiment. The Shanghai Stock Exchange Property Index initially surged as much as 9.8% on Tuesday as mainland trading resumed following the holiday, but gains were later pared back, closing only 2.3% higher. This retreat came after China’s top economic planner, the National Development and Reform Commission (NDRC), refrained from announcing additional property-specific measures at a highly anticipated briefing.
Hong Kong-listed Chinese developers also experienced significant volatility. The Hang Seng Index fell, and developer stocks tumbled 24%, underscoring the persistent concerns about the sector’s long-term health. While the housing market stimulus measures announced on September 24 had sparked a 63% rise in the market prior to the holiday, many investors appear to be waiting for more concrete signs of a sustained recovery.
At the NDRC briefing, where many had expected more fiscal stimulus, the commission reiterated existing policy goals rather than unveiling new measures. NDRC Chairman Zheng Shanjie emphasized the government’s focus on accelerating the absorption of housing inventory, improving the quality of new homes, and revitalizing existing land, but he stopped short of outlining any new initiatives that might directly bolster the real estate sector.
While the short-term boost in sales and buyer interest during the holiday period is a positive sign for China’s real estate market, questions remain about the longer-term sustainability of this rebound. Analysts caution that more significant economic rebalancing is necessary to support a sustained recovery.
The housing market would likely hinge on broader improvements in the economy, particularly in terms of job and income growth. “A solid recovery in the real economy, reflected in improving job and income outlooks, holds the key to a turnaround of confidence in housing,” Hung wrote in a report. She also pointed out that concerns over unfinished or delayed home construction projects could prompt some buyers to prefer purchasing secondhand properties over new ones, which might limit the impact of the government’s stimulus measures on new-home sales.
This sentiment was echoed by economists from UBS Group AG, who warned that while property sales “may have improved” in early October, broader economic indicators are expected to suggest weak momentum. Economists Tao Wang and Ning Zhang speculated that authorities might unveil additional fiscal measures after the holiday or around October 18, when third-quarter economic data is set to be released.
Looking ahead, many analysts believe there is still room for additional policy easing, particularly in China’s major cities. Citic Securities, for example, sees potential for the market to stabilize in first-tier cities, where the number of visitors to showrooms and completed transactions has been on the rise.
“It seems like the number of visitors to showrooms and transactions in first-tier cities has risen,” Citic Securities analysts, including Chen Cong, wrote in a report on Monday. They added that price declines in these cities may be coming to an end. This suggests that government interventions are starting to have an impact, particularly in the more affluent urban centers, where buyers have been more hesitant to commit to property purchases amid falling prices and concerns over the broader economic outlook.
However, lower-tier cities, which have also been grappling with housing price declines and overcapacity, may require more aggressive measures, such as increased subsidies, to reignite demand. Additionally, the real estate market in these smaller cities is more closely tied to local economic conditions, which could complicate the effectiveness of broad-based policy interventions.
As China grapples with the twin challenges of reviving its real estate market and rebalancing its economy toward domestic consumption, the government’s recent policy measures represent a clear attempt to stabilize a key pillar of the economy. However, the path to a full recovery remains uncertain, and much will depend on the broader economic context.
A more durable rebound will likely require sustained improvements in employment, household incomes, and consumer confidence, as well as a resolution to the persistent issue of unfinished or delayed property projects. Without these factors, the recent uptick in housing sales may prove to be short-lived, leaving the real estate sector vulnerable to further shocks.
As the fourth quarter unfolds, the release of key economic data and any additional fiscal measures will be closely watched by investors and homebuyers alike. While the government’s current stimulus efforts have provided a much-needed boost to the market, the long-term sustainability of the recovery remains an open question.
