(Yicai) Dec. 17 — The continued decline in real estate investment in China is because of efforts to digest inventory and strictly control incremental supply across different regions, according to a report.
The drop in investment is a rational choice by developers given current market conditions, so it should be analyzed objectively and understood correctly, Xinhua News Agency reported, citing the Office of the Central Financial and Economic Affairs Commission as saying on Dec. 16 in an interpretation of the Central Economic Work Conference.
China made real estate market stabilization a main priority for next year at the Central Economic Work Conference, the nation’s top annual economic policy meeting held from Dec. 10 through 11. It said relevant policies should be tailored to local conditions to control the increase of new homes, reduce the housing stock, and enhance supply, while encouraging the acquisition of existing housing for use as affordable homes.
Sales of new and second-hand homes have remained stable this year, with the drop in housing prices continuing to narrow, officials from the Office noted, adding that China’s real estate market still has considerable room for high-quality development.
China’s real estate investment fell 16 percent to CNY7.86 trillion (USD1.08 trillion) in the 11 months ended Nov. 30 from a year earlier, according to data from the National Bureau of Statistics. New construction area declined 21 percent, while the sales area and value of newly built homes dropped 7.8 percent and 11 percent, respectively.
Unsold housing inventory declined by just over 3 million square meters as of the end of last month from the end of October.
The urbanization rate of China’s permanent population jumped to about 66 percent, while that for the registered population rose to only 48 percent, meaning rigid housing demand from “new urbanites” such as newly settled migrant workers and recent university graduates has yet to be fully unleashed. Regarding home improvement, a considerable number of urban residents “trade old for new” or “trade small for large.”
The share of pre-owned home sales among all house sales in China has surged to 45 percent this year from 28 percent in 2021, an official from the Office pointed out. “‘Good houses’ generally have no trouble selling, indicating that the potential for improvement demand is still significant.”
China needs to focus on three areas next, the officials noted. First, stabilizing the real estate market from both the supply and demand sides, strictly controlling incremental supply and revitalizing existing inventory, while fully releasing residents’ rigid and improvement demand.
Second, actively promoting the transformation and development of developers, supporting their shift from primarily selling new homes to holding more properties and providing high-quality, diversified residential services. And third, accelerating the building of a new development model for real estate, reforming and improving basic systems related to development, financing, and sales, and promoting a smooth transition between old and new models.
The destocking cycle for new homes and second-hand house listings in most cities still exceed reasonable ranges, necessitating short-term supply control, said Li Yujia, chief researcher at the Guangdong Housing Policy Research Center. The decline in major national real estate indicators is not only a passive outcome of industry contraction, but also proactive strict control over incremental supply, Li added.
Against the backdrop of significant changes in real estate supply-demand relations, controlling incremental supply is the necessary path to alleviating inventory pressure, balancing supply and demand, stabilizing prices and expectations, and achieving market stabilization, Li stressed.
Editor: Martin Kadiev