China’s fragile property market underscored by hesitant buyers


China property buyers are back on the hunt, but not quite ready to invest, underscoring the tenuous state of the country’s real estate market.

Despite a slew of measures to boost demand and the end of Covid Zero, Chinese residents remain reluctant to commit their savings to a sector that’s seen its worst downturn. That’s prompting analysts to expect more policy support coming out of the National People’s Congress this month, as Beijing refocuses its attention to economic growth.

“In order to stabilize the economy, authorities will likely reaffirm support for first-time homebuyers and those who wish to upgrade,” said Xu Yuejin, an associate director at China Index Holdings. “This paves the way for more policy easing around the national congress.”

In addition to measures at the annual parliamentary gathering, Xu said he expects more big cities to loosen restrictions on housing purchases, albeit in the less important districts.

Here are five metrics that take the temperature of China’s real estate market, gauging the state of homebuyer demand.

1. Second-hand market

More Chinese residents are checking out second-hand homes, with viewing rates at their best since at least September 2021, according to alternative data provider Sandalwood Advisors, which tracks the metric via a real estate platform in China.

In the biggest cities, including Shenzhen and Shanghai, about 178,000 visits were paid to existing homes per week on average in February, jumping 86 percent from November when China was still in lockdown. Interest rebound was also sharp in tier-2 cities, mostly in regional hubs.

That said, the viewings are not all translating into purchases.

“Although the numbers look stronger than expected, we think we need to see more evidence before concluding that the property market is resuming its upward trend,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities. “Overall, Chinese homebuyers’ confidence is still very fragile.”

2. New homes

Interest in new homes is also bouncing back after the Lunar New Year holiday, according to an index by property agency Centaline Group. A single new project was visited by an average 0.63 buyers in the third week of February, the most since mid-2021.

That may benefit cash-strapped developers in the run-up to a traditionally quick season of sales in March and April. Builders have scaled back on discounts, and may increase supply this month, according to China Real Estate Information Corp.

Sales mostly hinge on residents’ ability to generate income after the economy goes back to normal. Business activity could improve in the next few months, but it will likely be a “gradual process,” according to Zhiwei Zhang, president and chief economist of Pinpoint Asset Management.

3. More transactions

In Shenzhen, where housing affordability is the worst in China, existing-home transactions have warmed up since mid-February. There were two days where the city saw more than 150 units transacted, a threshold untouched since at least October, according to official data by the city’s housing bureau.

4. New sales fluctuate

The purchase rate of new homes across the country, however, remains unstable. Only about a third of units offered were sold on debut, halving from a peak in mid-January, according to Centaline Group data tracking 29 cities.

5. Fear of leverage

The nation’s outstanding mortgages rose only 1.2 percent last year, a sharp slowdown from 11 percent-plus growth at the end of 2021. Residential mortgages, which accounted for about 30 percent of loan books for China’s largest banks as of June, are considered to be among the highest-quality assets.

Weakening expectations over property prices may prompt households to continue deleveraging, said Michelle Lam, Greater China economist at Societe Generale SA. Bloomberg News