The Zhitong Finance App learned that recently, the chairman of China Merchants Shekou (001979.SZ) said at the performance conference that there is limited room for the real estate market to continue to decline. Under the guidance of the central government's various policies, the deep adjustments currently faced by real estate are expected to be gradually resolved within 2 to 3 years. After the problems are solved, real estate will enter a relatively stable, sustainable, and long-term steady stage of development.

In the last 3 years, the real estate market has experienced an unprecedented “cold winter”. Sales, financing, investment, and prices have declined across the board, the risk of developer debt default has concentrated, and market confidence and expectations have reversed. Recently, however, individual industry data have shown important positive signs. Combined with the government's policy orientation and macro trends, the real estate industry, which is the backbone of the national economy, still has a 10 trillion dollar market, and is currently in the process of being reborn.

The decline in real estate development investment narrowed for the first time in nearly a year

According to the latest data released by the National Bureau of Statistics, in the first two months of 2024, the cumulative decline in indicators such as capital available to real estate development enterprises across the country, commercial housing sales area, and sales volume continued to expand. The country's real estate development investment fell 9% year on year, and the decline was 0.6 percentage points narrower than the full year of the previous year. The decline in real estate development investment narrowed for the first time after a year of continuous expansion. Pu Zhan, deputy director of the Policy Research Center of the Ministry of Housing and Urban-Rural Development, believes this is a sign of marginal improvement.

Wang Xi, manager of Jiuxing Investment Fund, believes that the narrowing of the decline in real estate development investment intuitively reflects the rebalancing of market mechanisms under the influence of current policies, which shows that companies' expectations for the future of the industry have rebounded. According to statistics from relevant agencies, the local auction market in Hangzhou and Beijing is heating up recently, and premium rates have risen in 300 cities across the country. In January-February of this year, the total amount of land acquired by the top 100 housing enterprises increased by about 30% over the same period last year.

Yan Yuejin, research director of the Yiju Research Institute, believes that the latest real estate development investment data has sent two positive signals. First, the contraction in development investment was contained last year, which is also a positive sign of supply-side stabilization; second, the competitive structure of housing enterprises continues to be adjusted. Currently, enterprises that are capable of investing in development are healthier and more financially capable.

Recently, market turnover has shown a steady growth trend

The statistics on the year-on-year decline in real estate sales from the Bureau of Statistics also require dialectical analysis. Experts analyzed that from January to February, the sales area of newly built commercial housing across the country fell 20.5% year on year, and sales fell 29.3%. There are many reasons behind this. First, the base for the same period last year was high, and the concentrated release of demand for home purchases accumulated over the past 3 years ushered in a peak in sales. Second, February of this year coincides with the Spring Festival, a traditional low sales season. Third, the market is fragmented. In many places, there is a phenomenon where it is difficult to find a house in innovative, high-quality, and improved real estate, while demand for large-scale, traditional and ready-to-use products has dropped significantly.

In fact, excluding the influence of some factors, the current transaction volume of new and second-hand housing sales is picking up. According to Shell Research Institute's second-hand housing market monitoring data, after the 2024 Spring Festival, second-hand housing sales in Shell's 50 key cities continued to recover upward. Due to last year's special high base, the volume of second-hand housing transactions in January-February of this year decreased compared to the same period last year, but there was a significant increase of 28.5% over the same period in 2022. Looking at cities, second-tier cities saw a particularly impressive increase in transactions this year. In January-February, the cumulative sales volume of Shell second-hand housing in cities such as Hangzhou, Xuzhou, Huizhou, Quanzhou, and Harbin surpassed the same period last year. In the first two weeks of March, the sales volume of Shell second-hand housing in cities such as Shenzhen, Nanjing, Hefei, Changsha, Lanzhou, Dalian, Changzhou, Luoyang, and Jiaxing surpassed the same period last year. Second-hand housing transaction volume and price recovery in second-tier, third-tier and fourth-tier cities is obvious, indicating that the policy optimization implemented by these cities has had a positive effect on the restoration of market transactions.

At the same time, overall market prices showed a steady trend. According to data from the National Bureau of Statistics, in February, out of 70 large and medium-sized cities, the overall decline in commercial residential sales prices in various tier cities continued to narrow month-on-month.

Nirvana of the 10 trillion market catalyzed by policy

Currently, on the policy side, the “favorable factors” of real estate are also increasing. According to monitoring data from the China Index Research Institute, property market policies across the country were introduced more than 600 times in 2023. At the end of the year, Beijing and Shanghai heavily introduced policies such as lowering down payment ratios and lowering mortgage interest rates, drastically reducing residents' home purchase thresholds and home purchase costs. Currently, only some core cities still have certain restrictive policies.

The 2024 government work report describes real estate in more than 300 words. It points out the current situation, existing problems and future development of the market, and sets the main tone for real estate market regulation in 2024: safety, stability and development. The report stated that real estate policies should be optimized, and support the reasonable financing needs of real estate companies with different forms of ownership should be treated equally to promote the steady and healthy development of the real estate market. The report also points out that adapting to the development trend of new urbanization and changes in the relationship between supply and demand in the real estate market and speeding up the construction of a new model of real estate development, it also places special emphasis on meeting residents' rigid housing needs and diversified and improved housing needs.

Overall, demand for housing has not disappeared due to the current market downturn. In the long run, there is still potential for development in the industry, but housing development is moving from “whether there is” to the “good or bad” stage. Song Hongwei, research director of the Tongce Research Institute, told reporters that the current real estate market operation and development stage is different from the past, and it will enter a new stage of development in the future, that is, a stage of high-quality development. As far as consumer demand is concerned, the stage of development dominated by improved demand has gradually arrived. Although various data on the real estate industry are still at a low level, as the three major projects, including the renovation of urban villages, continue to advance, and the optimization and adjustment of core housing policies, future industry data is expected to bottom out and stabilize as policies continue to be introduced.