This week, UBS analysts expressed the hope that the Chinese real estate market, which in recent years has been in the condition of what can be called a deep and, in a sense, fundamental downturn, is gradually approaching a kind of stabilization point.
John Lam, head of Asia-Pacific property and Greater China property research at UBS Investment Bank, said during a conversation with media representatives that after four or five years of a downward cycle, there are relatively positive signals in the mentioned market. At the same time, it was noted that these signals do not spread throughout the Asian country and may be local. However, it was also overlined, compared to the past, the specified signs of improvement in the state of affairs in the Chinese real estate market should be more positive.
One of the signals about the stabilization of the situation in the mentioned market is the growth of sales in the largest cities of China.
According to the data analyzed by journalists, as of Wednesday, March 19, existing home sales in the five major cities of the Asian country increased by more than 30% from a year ago on a weekly basis. In China, the corresponding category is referred to as secondary home sales within the framework of standard practice. The primary real estate market typically consists of newly built apartment homes.
Currently, UBS predicts that home prices in China may stabilize early next year. It’s worth noting that preliminary expectations stipulated that the mentioned stabilization would be fixed in the middle of 2026. UBS experts also predict that secondary transactions could reach half of the total by next year.
The specialists of the mentioned financial institution looked at four factors that indicated China’s property market inflection point between 2014 and 2015. In this case, factors such as low inventory, a rising premium on land prices, rising secondary sales, and increasing rental prices are implied. Experts noted that as of February of the current year, only rental prices had not shown improvement.
In September, Chinese policymakers called for a halt in the decline in the property market. It is worth noting that the negative situation in the mentioned space is a factor of sensitive pressure on the state of affairs in the Asian country’s economic system, which currently needs additional growth drivers against the backdrop of deteriorating geopolitical conditions, including in the context of the emerging trade war between Beijing and Washington.
The Chinese real estate market accounts for the majority of the wealth of local households. It is also worth noting that just a few years ago, this market contributed to more than a quarter of the economy of the Asian country, which is the second-largest in the world.
Major Chinese developers such as Evergrande have defaulted on their debts. Property sales in the Asian country have almost halved relative to the figures recorded in 2021, and last year reached about 9.7 trillion yuan ($1.34 trillion). This is evidenced by the data from S&P Global Ratings.
The downturn in the Chinese real estate market began at the end of 2020. The reason for this process was that Beijing launched measures aimed at cracking down on developers’ high reliance on debt for growth. Over the past year and a half, the central and local governments have taken actions to improve the situation in the real estate market. However, these efforts did not reverse the negative state of affairs and did not even become a factor in a relatively significant improvement in the condition of the mentioned market.
At the end of 2024, the Chinese authorities announced more forceful incentive measures. Against this background, analysts began predicting a bottom could come as soon as later this year.
Back in January, S&P Global Ratings reiterated its projection, which predicts that the Chinese real estate market will stabilize by the second half of 2025.
At the end of February, Macquarie’s Chief China Economist Larry Hu announced three signals that could support a bottom line in home prices in the current year. The expert noted that in addition to the policy push, unsold housing inventory levels have fallen to the lowest since 2011 and a narrowing gap between mortgage rates and rental yields could encourage homebuyers to buy rather than rent. This week, Larry Hu stated that the Chinese housing market still needs financial support.
As we have reported earlier, China’s Economy Demonstrates Positive Results.
