Recently, an institution released sales data for the top 100 real estate developers in February of this year and made a simple comparison with the data from the same period last year, concluding that current commercial housing market sales have hit a new phase low, with even some self-media raising pessimistic arguments about guarding against a second downturn in real estate. From the data, commercial housing sales at the developer level in February did indeed show a year-on-year and month-on-month decline, but the impact of last year's high base and the misalignment of the Spring Festival timing must be taken into account. In February 2023, housing demand accumulated during the three years of the pandemic was released in a concentrated manner. According to National Bureau of Statistics data, commercial housing sales area in February of that year was 151 million square meters, the third-highest level for the same period in history, with an obvious base effect. In addition, last year's Spring Festival fell in January while this year's fell in February, so simple like-for-like comparisons cannot be made.
Of course, the market is clear about the effects of the high base and the Spring Festival timing misalignment. In addition, the top 100 sales rankings only consider new home transactions and do not take into account the sudden rise of second-hand home transactions, which have largely replaced new home transactions and affected new home sales. According to CRIC monitoring data, second-hand home transaction area in 19 key cities in January-February was 13.05 million square meters; although down 14% year-on-year, the transaction scale is still hovering near historical highs. Considering that the number of people traveling during the Spring Festival hit a record high, which dealt a blow to second-hand housing transactions that require viewings and matchmaking, second-hand housing activity has continued the high prosperity level of last year.
The decline in new home sales is also related to the drop in supply. CRIC data show that in January-February 2024, new home supply in 30 key cities fell 22% year-on-year, which is related to developers' tight capital chains and a slower pace of project launches. In 2024, with the implementation of the "white list" docking mechanism for real estate projects, through the "push-feedback" closed-loop workflow, project development loans will be promoted through "disbursement-use-repayment," easing developers' tight capital chains and driving project construction and sales. As of February 28, 276 cities nationwide had established city-level financing coordination mechanisms, proposing about 6,000 real estate projects; commercial banks quickly screened projects and approved more than 200 billion yuan in loans. Easing of capital chains will boost homebuyers' confidence in the delivery of pre-sale homes and increase acceptance of new homes.
Judging from recent high-frequency data, the market has shown signs of stabilizing. CRIC monitoring data show that in the 8th week of 2024 (February 19-25), the transaction index for cities at all tiers rebounded from low levels. Specifically, the first-tier index rose 26.09 month-on-month to 30.31; Guangzhou's transactions rebounded significantly, while Beijing and Shenzhen saw transaction growth of more than tenfold month-on-month on a low base. The second-tier city transaction index rose 22.93 month-on-month to 25.61; Chengdu and Wuhan saw transaction volume expand and have basically returned to the weekly average. The third- and fourth-tier city transaction index rose 65.78 month-on-month to 92.13; driven by the surge in transactions in leading large-scale cities, transactions in third- and fourth-tier cities rebounded significantly overall.
In fact, this trend was already reflected in the latter half of the Spring Festival. After the sixth day of the first lunar month (February 15), visits and subscriptions at new home projects on sale began to pick up, and single-day transaction volumes in some cities had returned to pre-holiday weekday levels. This means that as people returning home for the holiday gradually went back to their cities of employment after the Spring Festival, especially after the Lantern Festival, when major property projects began to open for business, supply and demand in the new home market began to return to normal, transaction levels gradually recovered to normal levels, and the downward trend in January-February will change in March.
It is worth noting that in projects or cities where prices can match the income levels of rigid-demand and home-swapping buyers, the pace of transaction recovery is relatively strong. Taking Shenzhen as an example, according to monitoring data from the Shenzhen Beike Research Institute, in the four days after the Spring Festival (February 18-21), the volume of newly added customer resources for second-hand homes in Shenzhen increased by 340.3% compared with the four days before the Spring Festival (February 6-9), viewing volume soared by 1,288%, and transaction volume hit a new high in nearly five years, up 163.6% year-on-year; even compared with 2019, the increase was 87.1%.
The better-than-expected rebound in new home and second-hand home transactions in Shenzhen is due not only to the release of purchasing power from the adjustment of purchase restriction policies before the holiday and the sharp 25-basis-point cut in LPR after the holiday, which lowered the cost of buying a home, but more importantly to the obvious correction in Shenzhen's new home and second-hand home prices over the past two years (for example, Shenzhen's second-hand home prices have fallen overall for more than two years since May 2021), releasing the inflated portion from the period of rapid price increases in the past. Current housing price levels have begun to match the incomes of the large numbers of homebuyers who settled in the city in previous years, and with the relaxation of purchase restriction policies, the LPR cut, and the adjustment of preferential standards for ordinary housing, large numbers of households without homes have begun to enter the market.
Since 2022, commercial housing prices have continued to decline, which is an inevitable path for releasing risks and an inevitable result of aligning housing prices with incomes and returning housing to its residential attribute. At present, the adjustment in the commercial housing market has lasted more than two years, and the possibility of further sharp corrections is becoming increasingly low. As housing prices correct from high levels, the state and various localities have actively introduced supportive policies, especially for young people and new urban residents, the main groups of homebuyers, by continuously lowering mortgage rates, reducing taxes and transaction costs, and encouraging developers to actively promote sales, so that supply and demand gradually match and reasonable housing demand driven by residential attributes (rather than investment and wealth-management attributes), which had been suppressed by high housing prices, is released. The stabilizing trend in the commercial housing market is becoming increasingly obvious.
Judging from the Shenzhen case, cities with net population inflows have become the fundamental base of China's commercial housing market. Young people, new urban residents, wage earners, and talent groups have relatively strong demand for homeownership housing and relatively strong aspirations for a better living environment. In the past, high housing prices made it impossible to realize this demand. Recently, the state has stepped up the construction and sale of allocation-type affordable housing and, through supply-side structural reform, made this type of housing the ** for rigid-demand groups. This also means that the rigid-demand group, numbering as many as 300-400 million people, will release a large amount of future homebuying demand through allocation-type affordable housing with low prices and good supporting facilities, which will also lay the foundation for a commercial housing market dominated by upgrade demand and provide a basis for sustainable development.
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