China's housing market deteriorates, both new construction and second-hand housing sales prices fall

In February, the month-on-month decline in the sales price of newly built commercial housing in all tier cities in China narrowed, while the year-on-year decline in the sales price of both new commercial housing and second-hand housing expanded.

According to the latest data released by the National Bureau of Statistics of China on Friday (March 15), the month-on-month decline in the sales price of new commercial housing in all tier cities across the country narrowed in February, but the year-on-year decline in the sales price of new commercial housing and second-hand housing expanded. The phenomenon of price but no market in China's real estate market is getting worse day by day.

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According to data from the National Bureau of Statistics of China, in February, the sales price of new residential buildings in first-tier cities in China fell by 0.3% month-on-month, the same rate as the previous month. Among them, the decreases in Beijing, Guangzhou and Shenzhen ranged from 0.1% to 0.8%, and Shanghai increased by 0.2%; second- and third-tier cities decreased by 0.3% and 0.4% respectively. In terms of second-hand housing, the first-tier cities fell by 0.8%, and the second-tier and third-tier cities both dropped by 0.6%.

Although the month-on-month decline in commercial housing prices narrowed, the decline compared with the same period last year is still widening. Data show that new residential buildings in China's first-tier cities fell by 1% year-on-year, while second- and third-tier cities fell by 1.1% and 2.7% respectively. The decline in the second-hand housing market was even more significant. First-tier cities fell by 6.3% year-on-year, and the decline was 1.4 percentage points higher than last month. The decline in Beijing, Shanghai and Guangzhou ranged from 5.3 to 7.5%. Second- and third-tier cities both fell by 5.1% year-on-year, and the decline was 1.4 percentage points higher than last month. expanded by 0.7 and 0.6 percentage points.

According to Reuters estimates, new residential prices in 70 cities in China fell 1.4% year-on-year in February, which was the largest decline since January 2023. The report pointed out that since 2021, the real estate industry has been struggling with one crisis after another due to liquidity crises caused by the authorities’ regulatory crackdown on developers’ high leverage.

Analysis: China’s real estate market has prices but no market

"Not only has China's housing market not risen, it is also falling. The biggest problem in China is not price, but price but no market." Cheng Xiaonong, a Chinese financial expert, said in an interview with this station that the so-called "price" refers to "listing for sale." , but if it cannot be sold, it is an invalid price. Real estate agents in China will tell homeowners that if the listing price is not reduced by 20%, no one will look at it. He believes that now only one of the 10 or 20 second-hand houses can be sold, and the owner who can sell this house must have lowered the price and sold it earlier than others.

Cheng Xiaonong, who studied statistics, said that when calculating real estate prices in China, the listed and sold prices are calculated together, which can drive up prices. He said: "Statistics in China is called technology, and technology means there are many tricks in it. I study statistics, and I am very familiar with these technologies."

Number of cities in China where house prices fell in February increased

The Chinese media "21st Century Business Herald" pointed out that in February, the price of new houses in 70 cities increased month-on-month in 8 cities, a decrease of 3 from the previous month; there were 59 cities with a month-on-month decrease, an increase of 3 from the previous month; and 3 cities remained unchanged. There were 2 cities where second-hand house prices increased month-on-month, and 68 cities where prices fell month-on-month, the same as last month. In terms of year-on-year growth, in February, there were 57 cities where new home prices fell year-on-year, an increase of 4 from the previous month; there were 70 cities where second-hand home prices fell year-on-year, the same as last month.

The Wall Street Journal of the United States pointed out that the above-mentioned data from the National Bureau of Statistics of China showed that the number of cities in China where housing prices fell in February increased, and "concerns about policy measures to stimulate housing demand persist."

Real estate continues to fall, affecting sluggish consumption

Regarding the issue that China's new home prices have narrowed but are still declining, Liu Mengjun, a researcher at Taiwan's China Economic Research Institute and director of the Economic Outlook Center, told this station that it can be seen that the entire real estate price in China is still correcting downwards. This also hinders China's economic growth. The first is the expectation psychology of the Chinese people, because consumption is linked to household wealth. If wealth is revised downwards, it means assets are shrinking, and the momentum of consumption will still not be too high, or even more conservative. Secondly, China’s population is aging day by day. Under such a demographic structure, it is difficult for consumption to expand. Even if the Chinese government intends to promote population growth, there are practical difficulties and it is difficult to change the trend of population aging. In addition, China's local government fiscal revenue momentum also rises and falls with real estate. Whether it is new or second-hand housing prices, it means that local government land finance will still not improve.

Liu Mengjun said: "Shrinking consumption momentum must be boosted by investment momentum. Local governments rely more on the financial resources of the central government, otherwise investment momentum cannot be released."

Can whitelist injection save troubled real estate companies?

In order to save the housing market, governments across China have introduced a number of policies. Premier Li Qiang mentioned in the government report of the two sessions that real estate policies should be optimized and the reasonable financing needs of real estate companies of different ownerships should be supported equally. However, the report also points out that it is necessary to effectively prevent and resolve risks in key areas, including real estate, local debt, small and medium-sized financial institutions, etc., to maintain overall economic and financial stability.

According to the Chinese media "Yicai Finance", the "white list" related to the real estate industry is accelerating, and the number of projects involved has reached 6,000, and financial institutions have approved loans exceeding 200 billion yuan. But "can the actual amount of funds in place quench the capital thirst of real estate companies? Can different types of real estate companies be treated equally?"

"Being on the white list means that the government agrees to bank loans to it, which does not mean that it will survive." Cheng Xiaonong used the analogy of a hospital giving a diabetic injection. If the hospital only has 3 beds and 10 patients come, the hospital will list only 3 people who can be used for dialysis. If the remaining seven people can survive it, they will get through it, and if they cannot survive it, they will fend for themselves: "The injection is a bank loan, which is equivalent to transferring the bad debts of real estate companies to the bank. The problem with the CCP now is that it has transferred the financial crisis of real estate companies to Translated into a banking crisis.”

Ni Hong, Minister of the Ministry of Housing and Urban-Rural Development of China, once mentioned at the two sessions press conference that real estate companies that are insolvent and have lost their operating capabilities "should go bankrupt and reorganize." Liu Mengjun explained that the economies of other countries in the world have gradually stopped falling and rebounded. While other countries are dealing with inflation, China has fallen into monetary tightening. "China underestimates the seriousness of bubbles." He said that according to the past experience of the United States, if it should go bankrupt, let it go bankrupt, and the bubble will burst soon. However, China's real estate bubble has been going on for two or three years and has been dragging on for a long time. It is very likely that the Chinese government is now determined to solve it.