Domestic housing market enjoying gradual uptick

Positive changes have been seen in transaction volume, transaction prices and the pace of inventory reduction for new homes in China's residential property market, which could lead to a more balanced supply-demand situation in the coming months and pave the way for market stabilization across the sector, said officials and industry experts.

The housing market has shown signs of stabilization as transaction volume improves, the year-on-year decline in home prices has narrowed and inventories of newly built commercial housing have shrunk, said Fu Linghui, a spokesman for the National Bureau of Statistics, during a State Council Information Office news conference held on Tuesday in Beijing.

So far this year, different regions have adopted measures tailored to local conditions to optimize housing policies, with a focus on reducing inventories and optimizing supply, in an effort to accelerate the development of a new model for the property sector, Fu said.

"China's housing market is undergoing a major shift from new-home sales toward transactions of existing homes. Data recently released by the Ministry of Housing and Urban-Rural Development showed that online registrations of secondhand home sales reached 550 million square meters in the first eight months, exceeding new-home sales for several consecutive months," Fu said.

From January to August, sales of new homes fell 12.1 percent year-on-year, while registered transactions of second-hand homes rose 10.6 percent. Although new-home sales declined, the increase in secondhand transactions has helped stabilize overall market activity, according to NBS data.

"Although key property market indicators remain in a period of significant adjustment, there are some positive signs. On the supply side, housing inventories are being cleared at a faster pace, further improving the balance between supply and demand," said Yan Yuejin, deputy head of the Shanghai-based E-House China R&D Institute, adding that on the demand side, the stabilization of housing prices has helped drive a sustained improvement in sales.

Among 70 major cities, 38 saw year-on-year declines in new-home prices narrow in August on a month-on-month basis. The declines narrowed by 0.2 percentage point in first-tier cities and 0.1 percentage point each in second and third-tier cities. In the used housing market, 48 cities saw year-on-year price declines narrow, with the corresponding reductions being 1.0, 0.2 and 0.2 percentage point for first, second and third-tier cities, respectively, Fu added.

"Such a tendency to occur at a conventionally low season showed the market resilience, and it is expected that September and October will see evident growth," said Li Yujia, a researcher on residential policy in Guangdong province.

In the meantime, there was also a nationwide inventory decline of newly built housing, which marked a year-on-year decline for six straight months so far this year.

"The changes in the market stem from the property sector entering an era dominated by existing housing stock. Most first-time and essential housing demand has shifted toward the pre-owned home market, while the new-home market is increasingly driven by demand for home upgrades, particularly in China's vast number of second and third-tier cities. The shift is reflected by the fact that the average floor area of newly built homes sold in 50 major cities exceeded 120 square meters per transaction during the first eight months," Li said.

Li added that as the supply side has continued to reduce inventories and excess production capacity — helping bring supply and demand into better balance — the floor area of new housing awaiting sale has declined for six consecutive months nationwide as of August.