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

On March 16, the National Bureau of Statistics released data showing that in February, the month-over-month decline in housing prices in 70 large and medium-sized cities continued to narrow, with year-over-year decreases. The number of cities where new commercial residential sales prices increased or remained flat compared to the previous month increased compared to last month.

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

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

Zhang Dawei, Chief Analyst at Centaline Property, stated that the most prominent highlight of the February housing market is the continued narrowing of the month-over-month decline, which directly reflects the initial signs of market warming. In the new commercial residential sector, first-tier cities led the stabilization, with prices shifting from a 0.3% decline last month 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 February’s housing price data already conveyed clear positive signals, indicating a structural recovery in the market. Among these, improved products in core first- and second-tier cities have become the main focus of this recovery. Zhang Bo said this structural recovery shows that the supply and demand match is improving continuously, further strengthening the trend of steady growth in the housing market, and the “small spring” of the housing market is worth期待.

Housing investment decline also showed a significant narrowing. 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-over-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 unsold commercial housing was 79.998 million square meters, a year-over-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 unsold properties for less than three years was 60.616 million square meters, down 1.6%.

“At the end of February, the year-over-year growth rate of unsold commercial housing inventory 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 inventory growth rate essentially reflects a relief in inventory pressure. Simply put, the available housing supply on the market has relatively decreased, and the supply-demand relationship is gradually balancing. This is another significant positive signal from the supply side since the major changes in the real estate market’s supply and demand dynamics in 2023.

Targeted local policies to stabilize the housing market 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 housing loan quota 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 rebound in Shanghai’s second-hand housing market is mainly due to effective policies combined with in-depth market adjustments, which have actively released housing demand. Although the nationwide housing market has not yet fully bottomed out, several key indicators have turned at a turning point, strengthening the foundation for stabilization,” 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 to observe the annual outlook. It is expected that the supply of quality projects in core cities will increase, 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 real estate market this year. To achieve a “bottoming out and stabilization,” both income expectations and housing price expectations need to see substantial improvement and recovery.