Recovery of industry appears possible as demand solidifies, policies succeed

Overall property sales gained traction in the first quarter, with the residential segment ending a yearlong contraction, data from the National Bureau of Statistics showed.

This, experts said on Wednesday, shows China's real estate industry, for long troubled by heavy debt, may be on course to stabilization and a broad recovery appears possible in the following months.

As demand, including that from first-time home buyers and families seeking better homes, continues to solidify, property sales data are indicating positive changes in the first quarter. And data on investment in the industry, although still reflecting a downtrend, also suggest the overall situation will likely stabilize going forward, said Fu Linghui, spokesman of the NBS, on Tuesday.

"Sales in the second half of the year will grow at an accelerated rate from a year ago. Inventory pressure will ease off, the decline in new property construction floor space will narrow, and the land market will see a steady recovery," said Liu Lijie, a market analyst from the Beike Research Institute.

Commercial housing sales by floor area amounted to 299.46 million square meters in the first quarter, down 1.8 percent year-on-year, but better than the 3.6 percent year-on-year decline seen in the first two months. But residential property sales by floor area grew 1.4 percent in the first quarter, NBS data published on Tuesday showed.

"This is a significant improvement in comparison with that of the first two months. The rebound is more evident in the residential property segment, which ended a 13-month contraction since February 2022," said Li Yujia, chief researcher at the Guangdong Planning Institute's residential policy research center.

Chen Wenjing, director of research with the China Index Academy, attributed the first-quarter sales rise to the continuation of local government measures that factored in specific local conditions.

"More than 100 policy optimizations were introduced by local governments across the nation in the first quarter, facilitating the release of pent-up rational demand for housing. Given the low comparison base of last year, sales of even commercial properties, not just residential properties, will likely see year-on-year growth in April and May," Chen said.

The sales figures appear robust in terms of value. In the first quarter, 3.05 trillion yuan ($442 billion) worth of commercial properties were sold, up 4.1 year-on-year. But the figure was eclipsed by that of residential property sales, which rose 7.1 percent year-on-year.

Yet, a sense of uncertainty continues to shroud the recovery of property developers' confidence, industry insiders said.

Investment in overall property development declined 5.8 percent year-on-year to about 2.60 trillion yuan in the first quarter, with that in the residential segment slipping 4.1 percent to 1.98 trillion yuan, according to the NBS.

The decline in property development investment widened by 0.1 percentage point from the first two months, showing real estate developers' confidence in full industry recovery is still feeble, said Chen Xiao, a senior analyst with the Zhuge Real Estate Data Research Center.

"The bright side is that we have noticed the land acquisitions in key cities are quite promising, making us positive that recovery in the property development investment will accelerate in following months," Chen said.

According to Liu, thanks to the effective efforts made to ensure timely delivery of properties to buyers, the key index of floor space of completed constructions is improving.

The amount of real estate space of completed construction reached 194.22 million sq m, up 14.7 percent year-on-year, and 143.96 million sq m of residential properties were accomplished during the first quarter, up 16.8 percent year-on-year.

The positive changes in key property indicators in the first quarter suggest the overall real estate market is stabilizing and poised for a market rebound, Chai Qiang, president of the China Institute of Real Estate Appraisers and Agents, was quoted as saying by China News Service.

"The property market has bottomed out, and gone is the toughest period for real estate developers," said Chai.