The Chinese property market has shown encouraging signs of bottoming out and stabilizing, driven by a comprehensive set of policy measures designed to ease access for homebuyers and alleviate their financial burden. However, analysts and officials agree that further efforts will be required to ensure a full recovery in the sector in 2025.
Policy Measures Yield Positive Results
In recent months, the Chinese government has taken aggressive steps to counter the prolonged downturn in the real estate market. Data from October and November 2024 shows a steady rise in new commercial housing sales, marking consecutive monthly increases, both year-on-year and month-on-month. These gains are attributed to the targeted policy measures introduced by the Ministry of Housing and Urban-Rural Development, which seem to have successfully halted the market’s downward spiral.
Notably, major cities like Beijing, Shanghai, and Shenzhen introduced preferential tax policies in November to reduce transaction costs for homebuyers. This followed earlier measures in September, including the reduction of the minimum down payment ratio to 15% across all housing categories and relaxation of home purchase restrictions. These efforts are seen as key drivers in stabilizing the property sector.
Government Focus on Promoting Demand and Optimizing Supply
As part of its ongoing strategy, the government has outlined two main priorities for the property market’s recovery: promoting demand and optimizing supply.
Promoting Demand
A major focus for 2025 will be accelerating the redevelopment of urban villages and dilapidated housing. The government aims to renovate 1 million additional homes in urban villages and rundown areas, expanding its initiative to nearly 300 cities. This move builds on the lessons learned from similar redevelopment projects between 2015 and 2017, which resulted in substantial sales and helped stimulate demand in the market.
According to Huang Yu, Executive Vice-President of the China Index Academy, the redevelopment initiative is expected to generate significant demand. The renovation of 1 million homes could translate into the sale of approximately 10 million square meters of new residential properties, providing a boost to the sector while improving living conditions for residents.
Optimizing Supply
On the supply side, the government is prioritizing the clearance of existing housing inventory. Local governments are being encouraged to use funds from special-purpose bonds to acquire and reclaim idle land. Additionally, a relending facility aimed at purchasing unsold commercial properties as affordable housing will be further expanded. This is expected to help reduce the large inventory of unsold homes that still burdens many cities, particularly second-tier cities.
Challenges in Inventory Clearance
Despite the positive momentum in some regions, significant challenges remain in addressing the surplus inventory in many cities. Shanghai and Hangzhou are leading the way with inventory clearance periods of less than 10 months, indicating healthy market conditions in those areas. However, many second-tier cities are still struggling with prolonged inventory overhangs, with some facing clearance periods of over 20 months. The large number of unsold properties remains a persistent issue, and tackling this inventory imbalance will be crucial to the sector’s long-term stability.
Outlook for 2025
Looking ahead to 2025, the property market is expected to experience gradual recovery, bolstered by the government’s continued support for urban redevelopment and efforts to reduce excess inventory. The emphasis on improving the affordability of housing and stimulating demand through favorable policies will play a key role in supporting a more sustainable and stable market. However, the recovery will likely be uneven, with some regions benefiting more from the policy changes than others.
For the property sector to achieve a solid recovery, it will be essential for local governments to clear their excess inventory more effectively and for the overall economy to remain resilient in the face of external challenges. If these conditions are met, the real estate market could experience a more sustainable recovery in 2025, laying the foundation for a stable property market in the years to come.
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