Analysts Caution Against Declaring Recovery in China’s Property Buying Surge, According to Reuters

By Casey Hall and Clare Jim

SHANGHAI – Property sales surged in several Chinese cities during the recent week-long National Day holiday, following a series of government measures aimed at stimulating the market. However, analysts caution that it may be too soon to declare a definitive recovery, as additional stimulus could still be required.

Just before the Golden Week holiday commenced on October 1, policymakers announced a forthcoming reduction in mortgage rates for existing home loans, part of a broader strategy to stabilize the struggling real estate sector.

Since 2021, China’s property market has faced significant challenges due to a wave of defaults by cash-strapped developers. This has resulted in a surplus of unsold new homes and unfinished projects, which have negatively impacted the economy and eroded consumer confidence.

During the holiday, there was a marked increase in the number of potential homebuyers visiting properties, with sales in many regions reportedly rising by various amounts. State media indicated that over 50 cities implemented measures to revitalize the real estate market, with almost 2,000 developments from more than 1,000 property companies participating in promotional activities, according to the Ministry of Housing and Urban-Rural Development.

The southern city of Shenzhen experienced some of the most notable improvements in market sentiment, as reported by local sources and property agents. Between October 1 and 3, sales of secondary market homes through a major consulting firm increased by 233% year-on-year, while new home sales soared by 569%.

In Shanghai, demand for new flats also surged, with many projects seeing high subscription rates of 80% to 90%. On the first three days of the holiday, one development by a state-backed company attracted 345 visitor groups and achieved sales totaling 261 million yuan (approximately $37.2 million).

A real estate agency noted an astounding 979% year-on-year increase in new home transactions in Shenzhen during the holiday period, alongside a 298% rise in secondary market deals.

Raymond Cheng, head of China property research at CGS International Securities, suggested that the strong sales momentum in certain cities could indicate a potential recovery in other areas, bolstered by robust policy support and renewed market optimism.

Comprehensive sales data for the Golden Week holiday is expected soon from private research firms, which will provide a comparison against a 17% decline in average daily home sales from the previous year.

Traditionally, the Golden Week holiday sees a spike in new home sales as developers roll out promotions and new property listings. Cheng anticipates that property sales in China could show positive growth by the fourth quarter.

Nonetheless, analysts from J.P. Morgan warned that the current momentum is not as robust as it was following the pandemic’s economic reopening in early 2023. They noted that recent sales growth could merely be a reflexive response to policy easing, suggesting that November sales will be crucial for determining whether the market has truly bottomed out. They also pointed out that lower-tier cities, facing more severe property gluts and declining populations, have yet to experience a revival in demand.

UBS analysts estimate that China may need as much as 3 trillion yuan (around $427.50 billion) to address the excess inventory of homes in 80 major cities, likely relying on bank or central bank support for this initiative.

UBS stated in a recent note that new economic data may continue to reflect weak momentum, despite improvements in early October property sales and holiday consumer spending, and anticipates an announcement of a significant fiscal package soon.