As the real estate market steps into the traditionally robust Golden September period, there is still room for policy adjustments to further stimulate market activity. Amidst concerns over declining market enthusiasm and insufficient transaction momentum, recent policy relaxations and market expectations hint at a potential upswing in the coming months.
Market Activity Lags Despite Traditional Boom Period
The real estate sector typically experiences a surge in activity during September and October, with developers capitalizing on the seasonal marketing opportunities. However, this year’s Golden September has gotten off to a slower start. According to CRIC research, the expected new residential supply in 28 key cities in September stands at 7.03 million square meters, marking a 4% decline month-on-month and a 59% decrease year-on-year. This figure significantly lags behind the average monthly supply of the second quarter and is roughly equivalent to the first quarter’s average.
Policy Relaxations and Market Expectations
Despite the slower market activity, policy relaxations have been a regular feature in recent months. In the first eight months of 2024, approximately 450 relaxations were implemented, with July seeing the highest frequency at 68 instances. However, the impact of these policies has been mixed. While the 5.17 New Policy in May and June saw some positive traction, recent policies have failed to generate significant momentum.
According to data from CRIC, the cumulative transaction volume in 30 key cities from January to August was down 34% year-on-year, with August alone showing a 20% decline compared to the same period last year. The lack of new policy initiatives and limited impact have contributed to this trend.
Consumer Sentiment and Market Expectations
Consumer sentiment remains a critical factor in the real estate market’s performance. The People’s Bank of China’s survey of 20,000 urban households in the second quarter of 2024 revealed that the income perception index fell by 1.3 percentage points compared to the previous quarter, while the income confidence index dropped by 1.4 percentage points. Moreover, 23.2% of respondents expect house prices to decline, the highest level since 2019.
These expectations reflect a broader trend of decreasing confidence in the housing market. After a year of fluctuating expectations, the number of people anticipating a price decline has surpassed those expecting an increase. The survey also indicates a decline in investment willingness, with current levels at their lowest in nearly three years.
Policy Space for Further Stimulus
Given the current market conditions, there is still room for policy intervention. The upcoming 930 policy deadline and rumors of further adjustments to existing home loan interest rates suggest that policymakers are considering additional measures to boost market sentiment. With both new and existing home markets showing signs of decreased activity and insufficient transaction momentum, policy stimulus is seen as essential to restore confidence.
Developers are particularly cautious in their approach, with supply reductions in both first and second-tier cities. In first-tier cities, supply has remained positive but is showing signs of moderation. For instance, in Beijing and Guangzhou, supply is expected to remain strong, while in Shanghai and Shenzhen, there is a notable decline in supply.
Second-tier cities are experiencing a more significant decline, with some cities showing signs of recovery while others continue to struggle. Third and fourth-tier cities are also facing challenges, with most cities in the Pearl River Delta region experiencing a decline in supply.
In conclusion, while the Golden September period traditionally brings a surge in real estate activity, the current market conditions suggest that policy intervention is necessary to drive growth. With consumer sentiment waning and market activity lagging, the potential for further policy adjustments remains a crucial factor in the sector’s recovery.
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