China’s Home Sales Plunge Over 30 Percent in Past 5 Months Despite Beijing’s Rescue Efforts

This aerial photo shows the halted under-construction Evergrande Cultural Tourism City in Taicang, Suzhou city, in China's eastern Jiangsu Province, on Sept. 17, 2021. Vivian Lin/AFP via Getty Images

China’s housing market witnessed further decline in May, according to a report by Beijing’s National Bureau of Statistics (NBS) released on June 17. Experts say Beijing’s new measures are ineffective in boosting the struggling property sector.

The data show that over the first five months in 2024, home sales plummeted 30.5 percent year over year, and developer investment fell by 10.1 percent year over year. However, due to Chinese authorities’ record of underreporting and covering up information, it is difficult to assess the veracity of Beijing’s current housing data.

Nonetheless, according to NBS numbers, housing prices continued to drop in May, with the annual decline rate slightly widening. First-tier cities saw new home prices fall by 0.7 percent compared to the previous quarter, widening by 0.1 percentage points from April. New home sales prices in first-tier cities decreased by 3.2 percent compared to the previous year, marking a 0.7 percentage point increase in the rate of decline from April, said the NBS.

Liu Aihua, spokesperson for the NBS, said at a press conference that the new data suggest that the real estate sector has shown some positive changes since Beijing introduced new measures in mid-May to boost the market. From January to May, the sales revenue of newly constructed commercial residential buildings declined by 27.9 percent, a slight improvement from the 28.3 percent drop observed in the first four months, she said.

Property Crisis

“China’s real estate problem is extremely difficult, if not impossible, to solve. The authorities can only pretend to address it,” Taiwanese economist Wu Jialong recently told the Chinese language edition of The Epoch Times.

Mr. Wu pointed out that the data show too many homes already built and questioned the Chinese Communist Party’s (CCP’s) urban renewal strategies, such as “tearing down unfinished projects, demolishing abandoned properties sooner, or convincing people to buy already finished homes.” He said that the authorities have no solution to the real estate crisis.

Beijing implemented new measures on May 17 to boost the property market, such as encouraging local governments to purchase unsold homes and convert them into affordable housing and reducing mortgage interest rates and down payments. However, initial data suggest that these measures have minimal impact on the market.

U.S.-based economist Davy J. Wong told The Epoch Times that the market would take time to adjust to these new measures. He also emphasized the need for fundamental reforms rather than temporary fixes.

He said that meaningful measures should include reducing property transfer taxes, enhancing social security to aid low- and middle-income families in buying homes, and improving real estate sector management.

‘A Vicious Cycle’

A 2023 research report by the Bank of China indicated that real estate-related loans have consistently accounted for approximately 40 percent of total Chinese bank credit over the long term.

Regarding the downturn in the property market, Mr. Wong stated: “It not only affects the safety of mortgage loans for banks but also has broader implications. It will severely impact the entire real estate industry and its 56 related industries. Ultimately, this could increase unemployment rates and decrease business profitability, lowering China’s overall profit margins of all relevant businesses.”

Mr. Wu pointed out that as the housing crisis deepens, risks extend beyond banks to local governments facing revenue declines and private developers at risk of bankruptcy or layoffs, affecting multiple industries linked to real estate.

“Real estate has always been a crucial collateral for bank loans. If the collateral market collapses, it will impair the property market value held by banks, affecting their asset structure and potentially leading to systemic risks,” he said.

The real estate sector contributes significantly to China’s GDP. According to a World Bank report, the real estate sector accounts for approximately 30 percent of China’s GDP.

“With such substantial impact, a collapse in real estate could trigger a vicious cycle of economic contraction,” warned Wu, adding that “continued deterioration could exacerbate social tensions.” 

Cheng Jing and Yi Ru contributed to this report.