Nationwide total investment in real estate development for 2024 was at RMB10.0 trillion, down 10.6% y-o-y, while investment in residential development was at RMB7.60 trillion, down 10.5% y-o-y.
However, influenced by the relaxation of home buying rules introduced in May and September, market confidence in residential unit purchasing was somewhat restored in 2024. The steep decline in property development investment is expected to moderate. At the same time, high quality residential units are becoming popular, driven by growing demand for upgrading and improved home quality. The development of fourth generation housing is expected to gradually stimulate demand and boost sales and will in turn support real estate companies to reinvest in new home projects.
Key Takeaways
- Overall decline in residential development investment is now expected to slow, supported by demand for quality upgrades
- Policy optimization is yielding results, with new home sales area in Q4 rising 2.9% y-o-y
- Recovery in the new homes sold transaction area at year-end slowed the overall downward trend in prices
- Housing supply surge in Q4 resulted in a slight inventory rise
- Relaxed purchasing policies are releasing demand, although price-for-transaction area strategies remain evident in Tier 1 cities
Summary and Outlook
China's economy sustained a 5% y-o-y growth rate in 2024, but the macro economy environment remains under substantial pressure. As one of the major pillars of the domestic economy, the real estate industry has dragged down overall economic growth for several years. The residential market, representing the largest segment of the overall real estate sector, has exerted the most significant influence on investment growth.
In 2024, China’s residential new home transaction area and transaction volume were significantly lower than in 2023, declining by 14.1% and 17.6% y-o-y respectively, and dropping a further 5.9 and 11.6 percentage points from the declines of 2023. Given the multifaceted pressures confronting the macroeconomy, the importance of “stabilizing the housing market” cannot be overstated.
In Q4 2024, the nationwide new home sold area of 226.62 million sq m was up 21.4% q-o-q and 2.9% y-o-y. The sales value of RMB2.46 trillion was up 29.8% q-o-q and 4.0% y-o-y. With two rounds of favorable property market policies introduced during the year, the declining trend in the residential sales area was paused. However, growth rates for investment in residential development and the average sales price of residential new homes remained in negative territory.
We project that property market policies will maintain an accommodative stance in 2025, with room for further relaxation of restrictive measures in some cities, while loan interest rates may also adjust downwards. Meanwhile, proactive debt resolution measures will help mitigate systemic risks, while government purchases of existing home units are expected to both help accelerate affordable housing supply and to reduce inventory. Urban village monetized resettlement is also likely to stimulate demand.
