Multiple Real Estate Market Indicators Show Initial Signs of Warming in February

On March 16, the National Bureau of Statistics released the February data on the price changes of commercial residential sales in 70 large and medium-sized cities. The month-on-month decline in housing prices continued to narrow, and year-on-year prices decreased. The number of cities where new commercial residential sales prices increased or remained flat compared to the previous month also increased.

In February, the month-on-month price of newly built commercial residential properties in first-tier cities shifted from a 0.3% decline to stability. Beijing and Shanghai both rose by 0.2%, Guangzhou remained flat, and Shenzhen fell by 0.3%. In second- and third-tier cities, new commercial residential sales prices decreased by 0.2% and 0.3% respectively, with the decline narrowing by 0.1 percentage points.

Regarding second-hand housing, in February, the month-on-month prices in first-tier cities fell by 0.1%, narrowing the decline by 0.4 percentage points from the previous month. Beijing and Shanghai increased by 0.3% and 0.2%, respectively, while Guangzhou and Shenzhen decreased by 0.5% and 0.4%. In second- and third-tier cities, second-hand housing prices decreased by 0.4% and 0.5% respectively, with the declines narrowing by 0.1 percentage points.

Notably, among the 70 large and medium-sized cities, 10 cities saw an increase in new commercial residential sales prices month-on-month, 7 cities remained flat, totaling 9 more than the previous month.

Zhang Dawei, Chief Analyst at Centaline Property, stated that the most prominent feature of the February housing market was the continued narrowing of month-on-month declines, which directly reflects the market’s initial warming. In the new commercial residential sector, first-tier cities led the stabilization, with prices shifting from a 0.3% decline to stability. Beijing and Shanghai both rose by 0.2%, becoming the core drivers of market stabilization.

Zhang Bo, Director of the 58 Anjuke Research Institute, pointed out that the February housing price data already sent clear positive signals, indicating a structural recovery in the market. Among these, the improvement-oriented products in core first- and second-tier cities have become the main focus of this recovery. Zhang Bo noted that this structural recovery shows the market’s supply and demand are increasingly aligned, further strengthening the trend of steady growth, and the “small spring” in the housing market is worth looking forward to.

The decline in real estate investment has also significantly narrowed. According to the National Bureau of Statistics, in the first two months, nationwide real estate development investment reached 9,612 billion yuan, down 11.1% year-on-year, narrowing the decline by 6.1 percentage points compared to the whole of last year. Residential investment was 7,282 billion yuan, down 10.7%, with the decline narrowing by 5.6 percentage points. Additionally, as of the end of February, the inventory of commercial housing for sale was 79.998 million square meters, a year-on-year increase of 0.1%, with the growth rate slowing by 1.5 percentage points from the end of 2023. Among these, the area of properties for sale for less than three years was 60.616 million square meters, down 1.6%.

“By the end of February, the year-on-year growth rate of commercial housing for sale nationwide was 0.1%. This is the smallest growth rate since July 2021 and is an important signal,” said Yan Yuejin, Deputy Director of the Shanghai E-House Research Institute. The narrowing of the growth rate of the for-sale area essentially reflects a relief in inventory pressure. In simple terms, the available supply of homes for sale is relatively reduced, and the supply-demand relationship is gradually moving toward balance. This is another significant positive signal from the supply side since the major changes in the supply-demand relationship of the real estate market in 2023.

Targeted policies to stabilize the housing market at the local level have become an important catalyst for market recovery.

Taking Shanghai as an example, on February 25, Shanghai issued the “Notice on Further Optimizing and Adjusting the City’s Real Estate Policies,” introducing seven measures including shortening the social security contribution period for non-Shanghai residents, relaxing the eligibility for home purchases with a residence permit, and increasing the maximum loan amount for housing provident fund loans. Market confidence was quickly ignited, and transaction activity steadily increased toward the end of February. On March 7, the daily transaction volume of second-hand homes in Shanghai reached 1,324 units. Subsequently, the volume continued to rise, and on March 14, the daily transaction volume hit a new high of 1,472 units for the year.

“The recovery of the Shanghai second-hand housing market is mainly due to effective policies combined with deep market adjustments, which have actively released housing demand. Although the nationwide housing market has not yet fully bottomed out, several key indicators have shown turning points, making the market’s stabilization more solid,” Yan Yuejin said.

Cao Jingjing, General Manager of the Index Research Department at China Index Academy, believes that the traditional peak season of the “small spring” is an important period for observing the annual outlook. She expects that the supply of quality projects in core cities will increase, potentially driving a phased recovery in new home sales. Conversely, lower-tier cities mainly focused on “destocking” will face short-term pressure, and differentiation will remain a main feature of the 2024 real estate market. To achieve a “bottoming out and stabilization,” both income expectations and housing price expectations need to improve substantively.