July-August is the traditional off-season for the real estate market, with transaction volumes experiencing a seasonal decline. According to real estate market data released by the National Bureau of Statistics on August 15, from January to July, the sales area of newly built commercial housing nationwide was 516 million square meters, a year-on-year decrease of 4.0%. The decline in new construction starts continued to narrow at a low level, while the decline in investment slightly expanded. In July, among the 70 large and medium-sized cities, the month-on-month sales prices of commercial residential buildings in cities of all tiers declined, and the year-on-year declines generally narrowed.
Industry analysts believe that the market is still in a phase of deep adjustment. However, land auctions for prime plots in core cities have maintained relatively high activity, and the launch of high-quality projects is expected to continue supporting the market. In the second half of the year, core cities are likely to maintain resilience thanks to policy improvements and strong fundamentals.
The anti-decline resilience of core cities is prominent, with improvement-oriented demand becoming the key to the market rebound in the third quarter.
“The national real estate market continues to show a divergent trend of ‘core cities stabilizing and recovering, while non-core regions continue to adjust,'” said Zhang Bo, Dean of the 58 Anjuke Research Institute, in an interview.
According to the July housing price data released by the National Bureau of Statistics, the decline in new home prices in first-tier cities narrowed to 0.2%. Shanghai’s new home prices bucked the trend and rose, leading the nation for several consecutive months. Data from Anjuke showed significant increases in both new and second-hand home prices in Beijing and Guangzhou. The decline in second-tier cities expanded to 0.4%, while weaker second-tier cities and third- and fourth-tier cities faced “double declines in volume and price” and prominent inventory pressure.
“The narrowing decline in new home prices in first-tier cities reflects the stronger anti-decline resilience of high-energy-level cities. The counter-trend increase in Shanghai’s new home prices is mainly due to the concentrated release of high-end improvement-oriented demand. At the same time, first-tier cities and some strong second-tier cities are gradually restoring confidence through policy optimization and high activity in the land market,” Zhang Bo added.
Regarding the second-hand housing market, the downward trend in prices has intensified. Combined with online data from Anjuke, home search activity has declined, and the time properties remain on the market has lengthened. Although listing supply and operational vitality have slightly improved, they are insufficient to offset the negative impact, which is also related to the seasonal off-season and homebuyers’ market confidence.
Additionally, Anjuke data showed that in July, the search volume for large units with a construction area of about 144 square meters or more increased significantly year-on-year. The destocking cycle for low-density western-style apartments and subway-connected properties in core cities narrowed. In this regard, Zhang Bo predicted that improvement-oriented demand is likely to become the main force in the market in the third quarter, driving a structural rebound in transaction volume. In the future, urban renewal projects such as urban village redevelopment and old residential area upgrades will become new growth points, simultaneously driving the growth of improvement-oriented demand.
Recent frequent policy introductions across regions, especially the optimization and relaxation of purchase restrictions outside Beijing’s Fifth Ring Road, have already brought signs of rising market activity in August. Furthermore, at the local level, policies continued to be implemented in July. Chengdu phased out restrictions on housing resales in batches; Jingmen followed up with the implementation of sales of completed homes; multiple regions optimized provident fund loan policies, with Guangzhou planning to implement “converting commercial loans to provident fund loans”; and provinces such as Fujian, Shandong, Zhejiang, Guangdong, Hunan, Anhui, and Sichuan issued over 40 billion yuan in special bonds to recover and purchase idle existing land.
Cao Jingjing, General Manager of the Index Research Department at the China Index Academy, stated in an interview that currently, promoting the market to “stop declining and stabilize” remains the core goal of real estate policies. Short-term policies are expected to continue focusing on the redevelopment of urban villages and dilapidated housing, as well as the effective implementation of already introduced policies such as special bond land acquisition. Meanwhile, there is still room for interest rate cuts in the second half of the year.
In Zhang Bo’s view, the continuous introduction or implementation of local policies, such as trade-in programs, housing voucher resettlement, and provident fund easing, aim to unblock the replacement chain. However, the effectiveness and implementation intensity of these policies need to be further observed in the August market.
Unsold Area Decreases Month-on-Month, New Construction Starts Structure Improves, Policy Tools Are Actively in Place
According to real estate development investment data, from January to July, national real estate development investment decreased by 12.0% year-on-year. The area of new construction starts decreased by 19.4% year-on-year. At the end of July, the unsold area of commercial housing decreased by 4.62 million square meters compared to the end of June.
Yan Yuejin, Vice President of the Shanghai E-House Real Estate Research Institute, stated that the funding pressure on land-purchasing developers is still relatively high. For existing land projects, policies related to development and investment need to be continuously optimized to encourage developers to actively start construction. Particularly for high-quality housing products that meet market demand, sales expectations should be continuously enhanced. When necessary, presale standards should be optimized to accelerate the return of presale funds for developers.
Li Yujia, Chief Researcher at the Guangdong Urban-Rural Planning Institute’s Housing Policy Research Center, analyzed that as regions increase the supply of high-quality land and improve the business environment through public supporting facilities, and promote the redevelopment of urban villages and dilapidated housing, the market scale is beginning to stabilize.
“This year, the new construction starts indicator is generally improving positively, which is related to the main structure of new construction starts,” Yan Yuejin told reporters. Currently, developers that can start new construction are generally those with good sales conditions since the fourth quarter of last year, and the land purchase structure is also relatively good.
Li Yujia said: “Stopping the decline and stabilizing the real estate market is a relatively long process. The bottoming and transformation of real estate is also a process, which is a normal phenomenon, leading to repetitions in between. This change is mainly influenced by comprehensive factors such as policy implementation, seasonal consumption, and second-hand housing listings, but the trend of stopping the decline and stabilizing remains unchanged.”
“Supply-side reform must also continue to accelerate. Good housing will shift from high-quality and high-priced to ordinary housing, affordable housing, and old residential area upgrades. Particularly, urban renewal will become a new growth driver. Comprehensively promoting the remediation of shortcomings in public facilities will drive the improvement-oriented demand for selling old and buying new homes, which still has great potential,” Li Yujia added.
In Yan Yuejin’s view, existing policies need to be reorganized to ensure their effects continue to exert force. The foundation for the stabilization of the real estate market in the second half of the year remains solid, especially as policy tools are actively in place. At the same time, various regions need to continue innovating and exploring a sustainable and effective path to stabilize the property market.