Since 2023, the number of homes listed for sale in China has steadily risen to an all-time high as prices continue to fall due to slow demand. Economists suggest this trend reflects the overall economic collapse in China, manifested by stagnant housing sales, which is expected to trigger additional concerns.
In February, data from Zhuge House Research Center, an internet company in the Chinese real estate industry, showed that in fourteen key cities including Beijing, Shenzhen in Guangdong, Shanghai, and Hangzhou, the number of homes listed for sale increased by 56.85 percent year-on-year, rising for eighteen consecutive months. Among them, Hangzhou saw the highest year-on-year increase in home listings, reaching 181.29 percent, followed by Shanghai and Suzhou with year-on-year increases of 155.80 percent and 152.38 percent, respectively.
In March, over 100,000 homes were listed across ten cities, including Beijing, Hefei, Hangzhou, and Guangzhou. Over 150,000 homes were listed in Suzhou, Nanjing, Chengdu, and Tianjin. Then during the first part of April, data released by China’s media showed the number of homes listed for sale in Chongqing, one of China’s four largest cities, reached 272,000, an increase of 78,000 homes over the same period last year.
As the number of home listings continues to rise across China, this has led to a steady drop in pricing that typically occurs with second-hand housing transactions that rely on continuous and aggressive price reductions.
A senior realtor in Hefei told Chinese reporters that in March, 70 percent of the second-hand housing transactions in Hefei were houses priced at less than $280,000. Last year, second-hand housing prices had dropped significantly, and the downward trend continued in the first three months of this year. He said the average transaction price for second-hand housing during the same period last year was $250 per square foot, while this year it was only $210 per square foot.
A realtor in Wuhan told reporters that since the beginning of this year, second-hand home buyers have negotiated prices at 20–25 percent below the asking price, and homes with prices set too high have limited views. He cited an example of a second-hand home in Wuhan, which was initially listed for $170,000, but attracted hardly anyone; after reducing the price to $160,000, people started paying attention, but not until the price was reduced to $140,000 did the property finally sell.
Economic Downturn Weakens Real Estate Market
On April 13, Frank Xie, a marketing professor at the University of South Carolina’s Aiken School of Business, told The Epoch Times that China’s declining trend in home sales is tied to the troubled real estate sector and the surge in unemployment.Mr. Xie highlighted that as the real estate market falters, individuals having difficulty repaying loans or mortgages may opt to sell their properties. However, when a multitude of home sellers face the same predicament and rush to offload their assets, a scenario may arise where debts surpass the selling price, rendering the amount owed to banks higher than the achievable property price. Vigilance regarding the duration properties languish on the market becomes imperative for the real estate industry, as prolonged unsold periods signal market frailty.
Li Hengqing, a scholar at the Washington Institute for Information and Strategic Studies, echoed these sentiments in an interview with The Epoch Times. Mr. Li underscored that China’s current housing supply far exceeds the demand. Over the past few decades, a collaboration between the government and developers has fueled speculation, transforming real estate into an investment commodity. As individuals recognized the potential for the appreciation of real estate assets over time, property acquisition gradually evolved into a popular investment and fiscal management avenue for many.
Mr. Li further noted that the housing bubble in China has burst, prompting a fundamental shift in perception. The realization that house prices are not only stagnant but also declining has nullified the allure of real estate investment. Moreover, with 70–80 percent of Chinese residents owning properties, coupled with mortgage obligations, there’s a collective aspiration to expedite debt repayment.
Time on Market Reaches Unprecedented Duration
Mr. Xie’s reference to the “time properties spend on the market,” or the “inventory clearance cycle,” underscores a concerning market trend.The scale of new residential inventory across one hundred Chinese cities has surged to historic levels, with an inventory clearance cycle stretching to 23 months.
Data reveal that as of January, the inventory clearance cycle, or sales-to-inventory ratio, in one hundred Chinese cities stood at 22.9 months, marking the highest level since data tracking commenced in 2010. Notably, the sales-to-inventory ratio for new residential properties reached 16.6 months in first-tier cities, 19.6 months in second-tier cities, and soared to 30.2 months in third- and fourth-tier cities. Alarmingly, two cities recorded inventory clearance cycles exceeding one hundred months, namely Shaoguan in Guangdong (141.7 months) and Jinjiang in Fujian (108.9 months).
Li Yujia, chief researcher at the Guangdong Provincial Urban Planning Institute’s Housing Policy Research Center, highlighted that the allure of new homes has waned, intensifying competition between second-hand and new properties. However, the efficacy of the latter has dwindled, evident in the sluggish clearance rate of the previous years’ listings, which are persistently being categorized as “old inventory.”
March 2024 data indicate a 49 percent year-on-year decline in the transaction area of new residential properties across fifty key Chinese cities, amounting to 13.79 million square meters. Furthermore, the top one hundred real estate companies reported a sales turnover of approximately $107.6 billion from January to March, reflecting a 47.5 percent year-on-year decrease.
Mr. Li emphasized the formidable challenge of liquidating a vast real estate inventory. With the inventory clearance cycle in one hundred cities nearing 23 months, even if new construction halts immediately, it would take two years to offload existing properties. However, this scenario remains hypothetical.
He elaborated: “Why is it hypothetical? Because it’s based on the current rate of monthly house sales divided by existing inventory, resulting in a 23-month inventory clearance cycle. Yet, the actual scenario is far graver. Despite thousands or even tens of thousands of houses selling monthly now, can they be completely absorbed at the current rate two years later? No. As individuals already possess one or more properties, and property acquisition demands asset investment, the selling pace will inevitably decelerate, far from attaining equilibrium.”
Highlighting the broader economic decline in China, Mr. Li warned of compounded pressures manifesting in the stagnant housing sales, reverberating into numerous repercussions. He underscored the emergence of price reduction restrictions in regions, as the pervasive trend of lowering prices exacerbates the precipitous decline in the Chinese real estate market. Presently, a quandary ensues for all stakeholders amidst accelerated price slashes, threatening market stability.
