"Focus" China's real estate market small spring "ephemeral"? First-tier cities new home prices "turn flat," second-hand homes "turn down"

"Focus" Is China's real estate market's small spring a "flash in the pan"? First-tier cities' new home prices "flatten," second-hand homes "turn down"

April home prices remained flat again, with the year-on-year decline narrowing

The Sino-U.S. trade war affects some homebuyers' sentiments

Continued policy efforts are needed to stabilize the market

Author: Wang Shuyan

Reuters Beijing, May 19 - After a brief warm spell, China's real estate market cooled again in April, as the Sino-U.S. trade war affected some homebuyers' sentiments. The number of cities with rising prices among 70 large and medium-sized cities decreased, with first-tier cities' new homes changing from rising to "flat" and second-hand homes "turning down."

Analysts believe that the economic environment still has uncertainties, and homebuyers lack confidence, making the current rise in the real estate market lack broad support; continued policy efforts are needed to stabilize the market.

"It still requires a gradual process to stop the decline and stabilize... The biggest resistance seems to be the lack of confidence among homebuyers, as well as a relatively pessimistic outlook on income and employment," said Zhang Junfei, a real estate stock analyst at Morningstar.

Zhang Dawei, chief analyst at Zhongyuan Real Estate, pointed out that "the Sino-U.S. trade war affected some homebuyers in April."

He also stated that overall, first-tier cities showed signs of a seasonal downturn after policy adjustments, with transaction volumes recently showing a downward trend after the small spring demand was released. The market still needs more favorable policies to continuously stabilize.

According to calculations by Reuters based on data released by the National Bureau of Statistics of China on Monday, the year-on-year decline in the new residential price index for 70 large and medium-sized cities in April narrowed for the sixth consecutive month to 4.0%; month-on-month, it remained flat again.

The number of cities with rising new home prices month-on-month was 22, two fewer than the previous month; the number of cities with rising second-hand home prices month-on-month was five, five fewer than the previous month.

Wang Zhonghua, a statistician at the National Bureau of Statistics' Urban Division, stated that in April, among the 70 large and medium-sized cities, the sales prices of commercial residential properties in various cities remained flat or slightly decreased month-on-month: first-tier new homes changed from a 0.1% increase last month to flat, while second-hand homes changed from a 0.2% increase last month to a 0.2% decrease; second-tier new homes remained flat, and second-hand homes decreased by 0.4%; third-tier new homes decreased by 0.2%, and second-hand homes decreased by 0.4%. The year-on-year decline continued to narrow.

Rating agency S&P recently reported that new home prices in China's first-tier cities are expected to stabilize by the end of 2025, as the inventory of developers in first-tier cities was 12.6 months as of the end of January 2025, which is not much different from the inventory of about 10 months in the top 100 cities in China during the 2016-2019 upturn.

The agency also stated that the inventory levels in second-tier cities remain moderately high, and their new home prices may stabilize before the second quarter of 2026; third-tier cities have high inventory levels, and price stabilization will also take longer.

Sales decline significantly expands

From operational data, the National Bureau of Statistics announced that from January to April, national real estate development investment declined by 10.3%; the decline in sales area and sales amount was "one contraction and one expansion" to 2.8% and 3.2%, respectively According to calculations by Reuters, the investment decline in April was 11.3% (compared to -10% last month); the sales area and sales revenue decreased by 2.1% and 6.7% respectively (compared to -0.9% and -1.6% last month).

As the growth momentum in China's real estate market weakens, Chinese regulators delivered a "big package" of interest rate cuts and reserve requirement ratio reductions in May, stating that they will accelerate the introduction of a series of financing systems compatible with the new model of real estate development. The combined reduction of 35 basis points in personal housing provident fund loan rates and policy rates will directly lower the cost of home purchases for residents.

China is also intensifying efforts to promote "urban renewal." Recently, the General Office of the Central Committee and the General Office of the State Council issued a document stating that China aims to achieve significant progress in urban renewal actions by 2030. There will be increased support through central budget investments and other means, and eligible projects will receive support through ultra-long-term special government bonds. The central government will support the implementation of urban renewal actions.

The real estate sector of the Hong Kong and mainland stock markets weakened in early trading on Monday, underperforming the broader market. The Hang Seng Mainland Property Index .HSMPI fell by 0.9%; the CSI 300 Real Estate Index .CSI000952 dropped by 0.3%