China Residential Market Report 2021
Xiaoduan Zhang • 17/03/2022
Investment in real estate development for the year increased by 4.4% y-o-y, down 2.6 percentage points on the performance in 2020, while residential investment rose by 6.4% y-o-y, down 1.2 percentage points on the prior year.
The land acquisition area by real estate development enterprises totaled 215.9 million sq m in 2021, a drop of 15.5% y-o-y. The new land auctions mechanism significantly cooled the market, driving a sharp change from an overheated state at the beginning of the year to distinctly cold at the end.
However, in order to achieve the policy-based housing supply targets, land supply policies are expected to be refined on an ongoing basis. “Hot market” cities are expected to expand their land supply and appropriately increase project profit margins to support land transactions.
The intensive introduction of regulation policies throughout the year cover not only restrictions in home purchase, loan and sales, but also housing quality management, optimization of land auction rules, and credit tightening, which have greatly impacted the market.
In Q4, the number of cities with declining housing prices for both new and second-hand housing reached a five-year high, indicating a remarkable cooling of the market. Overall, China's real estate market has stepped into an adjustment channel. In terms of policy, the Political Bureau meeting and the Central Economic Work Conference repeatedly mentioned “prioritize stability while pursuing progress,” and “supportive policies should be implemented ahead of schedule, and all regions and departments should actively roll out policies conducive to economic stability.”
Given that the market is cooling down, the real estate regulation policy is expected to be moderately eased to stabilize the market. However, with “housing is for living in, not for speculation” remaining the keynote guidance, adopting “city-specific policies” means specific measures with appropriate tightness or relaxation will be taken in different places to maintain continuity, consistency and stability of the policy.