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Economic Watch: China's housing market gains strong momentum amid policy boosts, inventory cuts

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E-mail Xinhua, January 17, 2025

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BEIJING, Jan. 17 (Xinhua) -- Cafe on the first floor, gym and reading center on the second, and a fully furnished one-bedroom apartment with a monthly rent of 836 yuan (about 116 U.S. dollars)... for fresh college graduates like Liu Yumeng, this is the dream apartment they've always hoped for.

The building, located in Zhengzhou, capital city of central China's Henan Province, is one of the commercial housing projects that were acquired and turned into affordable housing by local state-owned enterprises.

The move, part of the country's policy mix introduced last year to reduce housing inventory, has played a major role in stabilizing the property market.

MEANS FOR SALES

Given a lingering slump in China's property sector, policymakers emphasized the need to understand the new dynamics of supply and demand in the real estate market last year, and urged measures to strictly control the increase of new commodity housing projects, optimize the existing stock and improve quality.

In response, local governments rolled out city-specific policies to slash housing stock. Key measures include eased purchasing restrictions, lower home-buying costs and the introduction of a trade-in scheme for houses to stimulate demand.

On the supply side, local authorities have encouraged the conversion of commercial housing into government-subsidized housing, while also curtailing land sales to cap market supply.

For instance, Nanjing and Suzhou, two major cities in Jiangsu Province, have sharply scaled back their residential land supply last year. According to plans issued by local authorities, the total land area for commercial residential projects in Suzhou's urban area shrank 63.5 percent year on year in 2024, while that of Nanjing dropped 51.3 percent.

Across the country, many cities have slowed their pace of land sales in 2024. In Shenzhen, Chongqing and five other cities, the sales of residential land were less than half the sales of new homes by area, according to a recent report by property research institution CRIC.

ENCOURAGING CHANGES

So far, these measures have yielded significant progress, with clear signs of recovery indicating improved market sentiment.

Most of the cities in China have seen a decline in the construction area of unsold commercial buildings last year. Five cities reduced inventory by over 1.3 million square meters as of the end of 2024, with Zhengzhou, where Liu's apartment is situated, boasting the biggest inventory reduction, the report said.

Thanks to the supportive measures, Jiangsu's housing market has shown a turnaround. Data showed that in October, the area of new commercial residential housing and second-hand home sales in the province grew by 22.3 percent and 15.3 percent year on year, respectively, both significantly outpacing the national average.

Jiangsu's data reflected broader improvements in the market. Speaking at a conference on Friday, Kang Yi, head of the National Bureau of Statistics, said that positive changes have emerged in China's property market since September, with new commercial housing sales showing growth in both area and volume in the fourth quarter.

Official data showed on Friday that home prices in the four first-tier cities -- Beijing, Shanghai, Guangzhou and Shenzhen -- increased in December compared to the previous month. Among the 70 large and medium-sized cities surveyed, 23 saw month-on-month increases in new home prices last month, up from 17 in November.

Before the data release, global mining giant Rio Tinto, whose business reflects the demand for steel, indicated signs of stabilization in the Chinese property market in a report, according to foreign media.

QUICKER DESTOCKING EXPECTED

At Friday's press conference, Kang said that China's real estate sector will continue to improve in the next stage, as existing and new policies are effectively implemented.

There is still potential for both rigid demands and demands for improved housing, and a new model for real estate development will be gradually established, which will help to ensure the stable and healthy development of the real estate market, Kang said.

Despite increased positive changes and enhanced market confidence, industry insiders believe that home destocking will remain a key task for the real estate sector in 2025, anticipating more policy support and institutional guarantees down the road.

At the Central Economic Work Conference held in early December 2024, reasonably controlling the supply of newly added real estate land and advancing the disposal of existing commodity housing were identified as key focuses for the sector in 2025.

Wan Xiaoli, an associate professor at the Southwestern University of Finance and Economics, said that home destocking will be expedited in 2025.

Moving forward, coordination between fiscal and monetary policies will be strengthened, providing more robust support for city governments to acquire existing commercial housing projects, thus helping the sector to reverse the downturn and stabilize the market, Wan added. Enditem