Abstract: Since the second half of 2021, China's real estate market has undergone three years of deep corrections. On September 26, 2024, the Central Political Bureau meeting explicitly stated that “efforts should be made to halt the real estate decline and spur a stable recovery.” This statement signifies a substantial shift in the top-level assessment and policy direction regarding China's real estate market and reflects the central government's focus and expectations concerning the real estate issue. Meanwhile, some opinions emphasize that the problem of excessive inventory persists in China's real estate market, and nominal housing price adjustments have yet to be fully realized, making it challenging to achieve stabilization.
The brief believes that China's real estate market meets the preconditions to stop the decline and realize a stable recovery. The issue of “excessive inventory” depends on how we view the regional distribution of inventory. While there is an absolute surplus in third- and fourth-tier cities, the housing stock in first-tier cities and many second-tier cities is not excessive, and in some cases, even significantly insufficient from a dynamic perspective. The “nominal price adjustment” is the result of the market correction, policy orientation, and macroeconomic adjustments. In the short term, it is primarily a reflection of the level of trading activities in the real estate market. Once real estate transactions stop declining and start to recover, prices will stabilize accordingly. Based on a series of studies conducted by CF40 over the past few years, the brief has identified three key factors that are genuinely hindering the stabilization of China's real estate market: (1) the risks associated with real estate enterprises have not been systematically and effectively resolved; (2) insufficient adjustment of nominal interest rates has led to high real interest rates; (3) there is a prominent spatial misallocation in housing supply.
Drawing from CF40's previous research, the brief has proposed a package of plans to stop the real estate decline and realize a stable recovery.
