QIN Hong: Paying Attention to the New Characteristics of the Real Estate Market

On March 25, 2024, Qin Hong published a commentary article in the Economic Daily, discussing on how to view the current real estate market? She thinks there are several new features worth paying attention to.

First, from the demand side, there are two 'better than' highlights in the real estate properties. Although the real estate market has been undergoing adjustment and transformation in the past two years, data such as new construction starts and sales have all experienced negative year-on-year growth.

I. The transaction volume of second-hand houses is better than that of new houses. In 2023. The online transaction volume of second-hand houses will reach 710 million square meters, reaching a historical peak, a year-on-year increase of 42.6%. This upward trend in transactions continued in January this year, with a year-on-year increase of 41.7% and a month-on-month increase of 1.7%. Currently, the transaction volume of second-hand houses exceeds that of new houses in 13 provinces, which has never happened before. The increase in the transaction volume of second-hand houses is due to the factors of large supply and there have large rooms for negotiation. It also shows that as long as the price, location, supporting facilities and services of the house are suitable, demand will still exist.

II. Completed apartments sales are better than forward housing deliveries. According to data from the National Bureau of Statistics, from January to February 2022, the sales area of forward housing deliveries has experienced negative year-on-year growth. The maximum negative value for the whole year of 2022 was -28%, and it was -14.1% at the end of 2023. However, during this period, sales of completed apartments have always shown positive growth, with a year-on-year growth rate of 18% in 2023, which is significantly better than that of forward housing deliveries. In terms of proportion, the sales area of completed apartments will account for 22.5% in 2023, an increase of 5.2 percentage points from 2022. Completed apartments sales continue to grow, indicating that people are still worried about the operation risks of real estate companies. It is reported that 312 cities in 31 provinces have established the financing coordination mechanism for the real estate project, and proposed the 'white list' of real estate projects that can provide financing support and provided the list to commercial banks. As of the end of February, commercial banks quickly screened projects and approved loans exceeding 200 billion yuan, which is conducive to stabilizing expectations. The growth in sales of completed apartments indicates a reduction in investment demand in the market, which is also consistent with the country's general direction of encouraging sales of completed apartments.

Second, from the supply side, there are two 'better than' characteristics. In 2023, the sales area of commercial housing nationwide was 1.117 billion square meters. As per the research, it can be found that there are also obvious new features on the supply side.

I. The performance of 'three good' real estate companies is better than that of the overall market. In the current market environment, real estate companies need 'three good' to be competitive. First, the asset quality is good, that is, the location of the development project is good. Second, the product and service competitiveness is good, that is, the products and services developed meet the current market demand, and the current demand for improvement in the new housing market is obviously more than the rigid demand. Third, it means that the enterprise is well managed, that is, the leverage ratio is not high and the internal control and management self-discipline is strong. At present, most of the real estate companies that meet the 'three good' standards are the central SOEs and high-quality real estate companies that are deeply involved in local areas. 'Three Good' real estate companies are competitive in the market and have better development prospects. In the past, the industry mainly looked at the competitiveness of real estate companies from the top 100. In the future, real estate companies must be viewed from the perspective of 'three good', especially those high-quality real estate companies that are deeply involved in local areas.

II. The head city market is better than the national overall market. The current real estate market differentiation is still continuing. According to data from the China Index Academy, the sales area of new houses in the top 20 cities will account for 20% of the country's total in 2023, an increase of 4% from 2022. The residential land transfer fees in these cities will account for 20% of the country's total, reaching 53%, of which Shanghai, Hangzhou, Beijing, Suzhou, Chengdu, Guangzhou and Nanjing all exceeded 100 billion yuan. This shows that real estate companies have confidence in the urban market with strong economic strength and good employment situation.

In the past, the real estate market was dominated by newly built commercial housing. In the future, as the real estate industry continues to become mature, the new housing market and second-hand housing market, affordable housing and market housing, rental housing and owner-occupied housing, new development and stock renewal will jointly constitute the housing real estate system. It is recommended that relevant departments release more comprehensive data so that the whole society can more conveniently and comprehensively understand the changes and trends in the real estate property. (Translated by YANG Fanxin)