Housing market tries to find its feet again

In third- and fourth-tier cities that do not have strong industrial supports and are facing a supply surplus, home prices may take time to rise again as they need to tackle the destocking problem first, Xie said.

"As for the longer term, the main goal is to form a substantial home market where houses are for living in, not for speculative investment (in line with the national principle). This should ensure healthy future development of the market," said Shaun Brodie, head of research on the China market at Cushman & Wakefield, a global real estate services firm.

Brodie further said the optimization of many residential real estate policies in various cities and local-level areas will gradually create a synergy that will help stabilize, and inject confidence into, the market.

"These policies will go some way to promote quality urban agglomeration, a further improved use of land resources, greater financial stability within the residential real estate market and the encouragement of not just the sustainable purchase of homes, but also sustainable renting of homes," said Brodie.

Sheng Laiyun, deputy head of the NBS, said during a State Council Information Office news conference on Oct 18 that there is still solid support for China's real estate industry to achieve sustainable and high-quality development.

"We are still in a stage of economic transformation, upgrading and high-quality development, with great room for urbanization both in terms of quantity and quality," Sheng said.

According to Yao with JLL, China's urbanization rate reached 65 percent in 2022 with a lot of room still for further enhancement in the years to come, which means there still exists abundant inelastic demand for improved living by way of housing upgrades.

"The initiative to build a housing system that treats leasing and owning properties equally will also promote property developers' transition from the traditional high turnover mode to a more stable operation mode. Such a transformation will not only boost economic development, but also guide the real estate market toward the direction of rational investment," Yao said.

Macdonald said the future will necessitate regulatory vigilance, which is already underway, and prudent guidance to sustain its steady growth.

"While the real estate sector faces short- to medium-term challenges, its long-term prospects appear promising. The current slowdown is, in part, a response to addressing long-standing market imbalances, introducing new guidelines, and enhancing regulatory oversight.

"Additionally, it involves aligning the real estate sector with the current pace of urbanization and economic growth. This evolution signifies the industry's transition toward maturity, with a greater emphasis on asset management, adaptability and sustainability, as opposed to the rapid growth observed in its earlier stages," said Macdonald.

Brodie said he expects the real impact of these policies on the market to be visible in the coming months, given the fact that the residential real estate sector generally takes time to absorb policies.

"In addition to policy support, the speed of China's urbanization and the gradual improvement in people's living standards have led to huge demand for essential as well as improved housing, which is also an important factor in the process of China's residential real estate sector's transformation to a market that can attain both high-quality and sustainable development," said Brodie.

On the course that the high-quality development of China's real estate market will likely take, Xie with CBRE said the country's consumption- and innovation-driven growth model is expected to create demand for various types of properties. So, property developers may find new business by focusing on urban regeneration as well as by offering high-quality products and services.