China’s residential property market has shown its first year-on-year growth of 2024 in October, with a notable 7.1% increase in new-home sales among the country’s top 100 real estate firms. This recovery marks a positive shift following a substantial 37.7% decline in September, according to recent data from the China Real Estate Information Corp (CREIC).
The reversal is attributed to the Chinese government’s latest and most substantial package of stimulus measures, including reduced mortgage rates, relaxed home-buying restrictions in major cities, and lowered downpayment requirements. These interventions have rekindled consumer interest and injected renewed optimism into a sector that has been in a prolonged slump. While state-backed developers have benefitted significantly, private developers continue to struggle, indicating a lopsided recovery that analysts believe will require sustained policy support to maintain momentum.
The latest property market data revealed a remarkable month-on-month increase of 73% in home sales, bringing October’s total sales among top developers to 435.5 billion yuan ($61.2 billion). This surge comes on the heels of the government’s robust economic interventions, which have provided substantial relief to homebuyers and lenders alike. The People’s Bank of China (PBOC) spearheaded these efforts, approving the refinancing of up to $5.3 trillion in existing mortgages, enabling millions of households to adjust their loan terms.
- Mortgage Rate Cuts: Lower borrowing costs on existing mortgages, reducing monthly payments for current homeowners.
- Relaxed Purchasing Restrictions: Policies in top-tier cities were loosened, making it easier for individuals to buy homes, particularly in suburban areas.
- Downpayment Easing: The government reduced minimum downpayment requirements, lowering the barrier for new buyers.
Analysts view these interventions as critical to jumpstarting property sales. According to Bloomberg Intelligence analyst Kristy Hung, “The increase in state-owned developers’ sales underscores a skew in transactions towards both state-linked projects and secondhand homes, highlighting the enduring challenges faced by private developers.” State-backed developers reported an average 26% rise in sales, while private developers recorded a 24% decline, indicating the selective nature of the recovery.
While state-owned enterprises have reaped the most benefit from the government’s stimulus, private developers remain beleaguered, facing challenges due to limited access to funding and weaker consumer confidence in their projects. This disparity is partially due to a history of financial overextension among private developers, many of whom borrowed aggressively during the housing boom. With tighter fiscal policies and limited bailout options, they now struggle to keep pace with their state-backed counterparts.
Notable private developers such as China Vanke Co. and Country Garden Holdings Co. continue to report lackluster sales performance. China Vanke, for instance, reported a 35% drop in contract sales over the first three quarters of 2024 compared to the previous year. The situation for Country Garden is similarly dire; the company recently secured approval from its bondholders to extend onshore bond payments in an effort to manage its mounting debt.
To meet looming financial obligations, many developers are increasingly reliant on improved sales to stabilize their cash flows and boost investor confidence. “Without stronger support for private developers, it’s difficult to see a full recovery,” Hung noted.
The renewed activity in the property market is pivotal for China as it strives to achieve its projected 5% GDP growth target for 2024. The property sector has traditionally been a major contributor to the country’s economy, accounting for a significant portion of gross domestic product and generating wealth for millions of households. However, the prolonged downturn over the past few years has eroded household wealth, suppressed consumption, and added to deflationary pressures.
Kristalina Georgieva, managing director of the International Monetary Fund (IMF), recently warned that China’s growth could fall below 4% if the country does not implement reforms to stimulate domestic consumption. This outlook underscores the urgency for policies that can stabilize the property market and restore confidence among both consumers and investors.
In late September, Guangzhou—a prominent commercial center—became the first tier-one city to abolish all restrictions on residential property purchases, a move that analysts believe will encourage other major cities to follow suit. Meanwhile, Beijing, Shanghai, and Shenzhen have also relaxed some restrictions, enabling more buyers in suburban areas and allowing certain households to purchase additional properties.
In a parallel effort to stabilize the economy, the People’s Bank of China recently injected an additional $70 billion into the money markets via a newly established policy tool designed to relieve liquidity pressures and spur bank lending. This move is part of a broader effort to ensure sufficient credit availability, particularly for businesses and households impacted by the downturn.
These liquidity injections align with the government’s strategy to promote sustainable growth by fostering both investment and consumer spending. As property developers rely on improved cash flows to manage debt, increased liquidity in the financial system could enable banks to extend more favorable loan terms to buyers, thereby boosting sales and stabilizing the housing sector.
The rebound in housing sales has been most pronounced in China’s tier-one cities—Beijing, Shanghai, Shenzhen, and Guangzhou—where the combination of high population density and economic dynamism fosters robust demand for housing. The easing of purchasing restrictions has further fueled this demand, encouraging more first-time buyers and investors to enter the market. The recovery in these urban hubs reflects both the latent demand for housing and the effect of government measures.
However, some experts warn that a recovery concentrated in top-tier cities may not be sustainable in the long run. Zhang Dawei, a real estate analyst, points out that “Although the loosening of restrictions in major cities has led to a rebound, a sustained recovery will depend on similar measures in lower-tier cities, where demand has been slower to recover.”
To support a more balanced recovery, analysts recommend extending incentives to smaller cities, where falling property values have deterred buyers and slowed economic growth.
The recent uptick in property sales is an encouraging sign for a sector that has struggled to regain its footing. But questions remain about whether this momentum can be maintained. While current policies have managed to trigger a short-term boost, experts argue that further measures may be necessary to sustain growth in both the property sector and the broader economy.
The Chinese government has hinted at additional policy support in the near future, particularly as President Xi Jinping reiterated the importance of reaching the 5% economic growth target. With a major legislative meeting scheduled for next week, economists are closely watching for potential announcements that could bolster the housing market and provide relief for private developers. “We expect more targeted measures to level the playing field for private developers and encourage more purchasing in smaller cities,” said Hung.
China’s housing market is likely to remain a focal point of economic policy as it recovers from its prolonged downturn. The government’s multifaceted approach—ranging from mortgage relief to liquidity injections and regulatory easing—indicates a commitment to stabilizing this essential sector. Yet, the sustainability of these gains will depend on the extent to which private developers can recover and whether smaller cities can replicate the momentum seen in top-tier markets.
