Home prices in some of China’s largest cities are showing signs of stabilizing, according to data from the statistics bureau on Monday. November saw new home prices in China’s four top-tier cities remain unchanged from the previous month, halting a 13-month streak of declines. Meanwhile, secondary home prices in these cities recorded a smaller drop of 0.1%, compared to a steeper decline in October.
Pent-Up Demand Boosts Market Activity
Potential buyers, who were previously unable to afford housing during China’s property boom, are now entering the market as prices soften, said Li Yujia, chief researcher at the Guangdong Housing Policy Research Center. “This has resulted in more active transactions, which is the reason new home prices in first-tier cities have stopped falling,” he noted.
Government Incentives Drive Sales
Following over three years of turbulence since China Evergrande’s default, Beijing has implemented policies to revitalize the housing market. In November alone, local governments across China introduced 61 measures, including transaction tax reductions and purchase subsidies, the China Real Estate Association reported. As a result, property transactions in top-tier cities like Shanghai and Shenzhen surged. In Shenzhen, secondary home sales hit a three-year high, with 2,390 units sold in the first week of December. Similarly, Shanghai recorded 27,050 secondary home sales in November, the highest in 44 months, according to the Shanghai Housing Administration Bureau.
Challenges Persist for Smaller Cities
Despite the positive trends in larger cities, overall housing prices across China continue to decline. Data showed that November’s new home prices in 70 cities dropped 6.1% year-over-year and 0.2% month-over-month. Secondary housing prices, less influenced by government policies, fell by 8.5% annually and 0.3% from October. Price declines were steeper in smaller cities, with new home prices in third-tier cities dropping 6.5% from a year earlier, compared to a 4.3% decrease in top-tier cities.
Economic Uncertainty Weighs on Buyers
The value of home sales for the first 11 months of the year fell by 20% to 7.49 trillion yuan (US$1.03 trillion), while real estate investment dropped 10.4% to 9.36 trillion yuan, according to the statistics bureau. At last week’s Central Economic Work Conference, China’s policymakers reaffirmed their commitment to stabilizing the real estate market. However, Macquarie analysts Larry Hu and Yuxiao Zhang cautioned that confidence among potential homebuyers regarding future housing prices and income prospects remains weak.