Chinese Real Estate Market Faces Strain in May, Experts Caution

• 2 June 2023
• International News
• 1404 Views

Amidst growing concerns, the Chinese real estate market experienced a tense period in May 2023, as indicated by a report from the US-based China Beige Book. Despite a surge in prices in April, housing sales in China witnessed a decline, as revealed by a survey of 1,085 business research companies conducted from 18th to 25th May.

The report highlights a significant drop in both prices and trading activities within the real estate sector.

“Challenging construction conditions attributed to reduced fiscal activity have resulted in lower revenues and production throughout May,” read the report.

The Beijing government has responded by easing debt pressure to provide support to real estate developers in recent years.

Economist Ting Lu sheds light on the situation, indicating a notable decrease in the number of new home sales per week, with figures standing at a mere 11.8% on 28th May, down from 24.8% the previous week. Notably, sales during both weeks were lower than in the corresponding period in 2019, prior to the outbreak.

The decline in real estate sales predominantly affected China’s major cities, often referred to as the primary market. Concurrently, Markit iBoxx reported that China’s high-yield real estate bonds reached a record low in November 2022 following Beijing’s announcement of a support plan, known as the “16-point plan.”

S&P Global Ratings analysts, in their assessment on 22nd May, expressed uncertainty regarding the market’s outlook, highlighting that national property sales in April fell by 900 billion yuan ($126.87 billion), below the monthly average of 1.1 trillion yuan seen the previous year.

S&P’s forecast for 2023 anticipates a decline of approximately 3% to 5% in Chinese developer sales, an improvement from the previous projection of 5% to 8%. This year’s outlook rests on the expectation of a 3% increase in sales in large cities, while sales in smaller cities are projected to experience a decline of no more than 10%. (Read more)

The evolving landscape of China’s real estate market has prompted cautious observation among experts, urging industry stakeholders to navigate the changing dynamics and seek opportunities amidst the prevailing challenges.

• Analysis