Real estate market stabilizes: supply and demand decrease by 20% in the third quarter, with a slight rebound in the fourth quarter.

In the third quarter of 2024, the overall real estate market returned to the low point of the year, with supply and demand both decreasing compared to the previous quarter, falling short of the average in the first half of the year. On one hand, real estate companies were not very proactive in releasing new properties, with the supply in the third quarter decreasing by 20% compared to the second quarter, and the cumulative year-on-year decrease still over 30%, especially in second and third-tier cities where the decline was significant, mainly due to the focus on destocking. On the other hand, there was a slight decrease in transactions in the third quarter, as demand softened after the mid-year rush, and the positive effects of new policies in major cities such as Beijing, Shanghai, and Hangzhou continued to decline, making transaction growth relatively weak. Compared to that, the second-hand housing market saw a stronger attraction to the end-users due to price reductions and an increase in listings, highlighting the cost-effectiveness and attracting new groups of buyers away from the new housing market. Looking ahead to the fourth quarter, we believe that with the support of favorable central policies, the overall transaction volume will rebound at a low point, with an expected increase of around 20% compared to the third quarter, and the year-on-year decrease in transaction volume will further narrow to within 30%. First-tier cities may experience a period of cyclical recovery under the relaxation of the "four restrictions", cities like Nanjing, Hangzhou, and Tianjin are expected to recover from the previous adjustments, while weaker second-tier and vast third and fourth-tier cities will continue with stable transaction volumes. The second-hand housing market will continue to grow due to its price advantage. 01 New supply in the third quarter decreases compared to the previous quarter, falling short of the average in the first half of the year In the third quarter of 2024, the supply of national residential properties steadily declined compared to the second quarter, with the restriction of new housing supply and a slow property market contributing to lower enthusiasm for housing developers. According to CRIC monitoring, the new supply in 115 key cities in July and August decreased by 20% compared to the second quarter, with a year-on-year decrease of 31%. The cumulative year-on-year decrease in supply for the first eight months was also 31%. In September, there was a slight increase in supply, but it remained at a low point for the year. In 30 key cities, new supply increased by 12% compared to the previous month, but still decreased by 50% year-on-year, reaching the lowest levels of the year. Estimates based on data from 30 cities showed a 22% decrease in new supply in the third quarter compared to the previous quarter and a 38% decrease year-on-year. In comparison with the first half of the year, the average decline was 9%, and the cumulative decline in the first three quarters was 34%. Different-tier cities are all experiencing a general decline in supply, with first and second-tier cities seeing a decrease of over 20% in supply compared to the second quarter, while 85 third and fourth-tier cities were already at a low level and experienced a small decrease of 12% compared to the second quarter. Affected by the "sales determine production" model, cities like Suzhou, Ningbo, Qingdao, and Jinan saw declines of over 40%, while a few cities such as Beijing, Guangzhou, Tianjin, Kunming, Changzhou, Fuzhou, and Xuzhou saw increases instead of declines compared to the second quarter, partly due to a lower base in the second quarter. Additionally, cities like Beijing, Guangzhou, and Tianjin saw a small wave of market recovery, leading to a slight increase in supply. 02 New home transactions decreased by about 20% in the third quarter compared to the previous quarter, with strong resilience in first-tier cities The real estate market in the third quarter of 2024 continued with the trend of stabilizing transactions, as the reduced supply combined with traditional marketing off-season, and the impact of high temperatures caused the overall transaction volume to fall to the lowest levels of the year. According to CRIC monitoring data, the transaction area of commodity residential properties in 115 key cities in July and August decreased by 17% compared to the second quarter, with a year-on-year decrease of 20%. The year-on-year decrease in cumulative transactions for the first eight months narrowed to 35%. September continued the trend of low transaction activity from August, despite an increase in supply, transactions continued to be stable with a slight decrease, reaching the second-lowest level of the year. According to CRIC monitoring data, transactions in 30 key cities in September decreased by 6% compared to the previous month, with a 34% year-on-year decrease, still a 17% decrease compared to the average monthly in the first half of the year. Based on data from 30 cities, it is estimated that the transactions in the third quarter will see a simultaneous decline compared to the previous quarter, with declines of over 20%, a 10% decrease compared to the first half of the year. Looking at cumulative data from the first three quarters, the decline is still narrowing, continuing the trend of weak recovery. In terms of different-tier cities, transaction performance mirrored supply performance, with declines in transactions across different levels, but first-tier cities showed greater resilience with relatively limited declines despite the market cooling down. Second and third-tier cities all saw a decline of over 20% in year-on-year transactions, indicating a significant market cooling. In particular, Guangzhou, Shenzhen saw increases in transactions in the third quarter compared to the same period last year, with increases in average transaction volume of over 10% compared to the first half of the year. Apart from the low base last year, the third-quarter's positive policy effects have also led to signs of small market recovery. Shanghai is also worth noting, with multiple luxury housing projects entering the market in August and September showing continued demand for high-end properties. In second-tier cities, the hot markets in the short term are mainly in Chengdu and Xi'an in the central and western regions of China, with transaction areas in the third quarter reaching 2.82 million square meters and 1.75 million square meters respectively, with year-on-year decreases still within 30%. It is worth noting that current property developers are focusing on quality rather than quantity, with market activity mainly supported by improved properties, leading to a higher overall rate of turnover compared to the needs of buyers. 03 In the third quarter, second-hand transactions decreased compared to the previous quarter, with stable transactions in Beijing and Shenzhen, and declines in Xiamen and Hangzhou In the third quarter of 2024, the cumulative transaction volume of second-hand housing in 16 key monitored cities is estimated to be 20.08 million square meters, an 8% decrease compared to the second quarter, with a 20% year-on-year increase, but a 13% increase compared to the average in the second half of last year. The cumulative transaction volume for the first three quarters of second-hand housing has remained the same as last year. Looking at monthly data, second-hand housing transactions decreased gradually from July to September. In July, the market continued to be active, reaching a new high for the year with a total transaction area of 7.55 million square meters, a 3% increase compared to the previous month, and a 41% increase year-on-year. In August, the market cooled down resulting in a 13% decrease in transactions to 6.59 million square meters due to factors such as hot weather. September's traditionally strong market performance saw a decrease in transactions of 10% to 5.94 million square meters, the second-lowest level of the year, with a year-on-year increase of 5%. City-wise, markets like Beijing and Shenzhen operated relatively stable, while Hangzhou and Xiamen experienced more significant declines. Hangzhou's transactions started strong in the third quarter, remaining hot in July, but gradually cooling down in August and September, with a cumulative transaction of 1.69 million square meters, an 18% decrease compared to the previous quarter, putting it at the forefront of cities with decreased transactions. Although it still saw a 77% year-on-year increase, it was mainly due to the low base effect last year. In comparison, cities like Beijing and Shenzhen saw an increase in second-hand housing transactions in the third quarter compared to the second quarter, with increases of over 10% compared to the first half of the year, supported by positive policies in the third quarter.In terms of resilience, the overall activity of the Shenzhen market remains active, with transaction volume only decreasing by 3% compared to the previous quarter's high base figure, and a year-on-year increase of over 70%. Beijing's transaction volume also increased against the trend, with a further 3% increase compared to the previous quarter.In 2024, the prices of first-hand and second-hand homes in the fourth tier cities such as Fo, Zhang, Wu, and Yan continued to decline, with the decline widening. According to the price changes of 70 large and medium-sized cities published by the National Bureau of Statistics, in the third quarter of 2024, the price index for new and second-hand residential properties in 70 cities continued to show a widening downward trend. Compared to January 2021, the overall price decline for new homes increased from 5.26% at the end of July to 5.99% at the end of August, while the price decline for second-hand homes increased from 12.92% at the end of July to 13.87% at the end of August. The trend shows that the price decline for new and second-hand homes is widening, with the decline in second-hand homes still exceeding that of new homes. In fact, the number of cities where second-hand home prices have decreased year-on-year has reached a peak since 2021. As of the end of August 2024, 67 cities have shown a downward trend, while the number of cities with decreasing new home prices has increased to 56. According to the average transaction prices of new residential properties in key cities monitored by CRIC in the first eight months of 2024, first-tier and eastern cities still lead by a large margin. Shanghai, Shenzhen, and Beijing rank among the top three in absolute housing prices. However, due to market cooling effects, Shenzhen's housing prices have declined by 2% year-on-year and Beijing has seen a decline of up to 9% due to structural factors. Guangzhou, Xiamen, Dongguan, Yiwu, and Hangzhou are in the second tier, with prices ranging from 3-4 thousand yuan per square meter. Sanya and Shaoxing are in the top 10, with prices above 25 thousand yuan per square meter. Compared to the second quarter, Nanjing and Suzhou have dropped out of the top 10, and Shaoxing and Yiwu have replaced them. Currently, based on the trend in the third quarter, the overall market is continuing to stabilize, with September transactions remaining largely flat compared to August. Looking ahead to the fourth quarter, we believe that with frequent statements from the central government at the end of September, policies such as interest rate cuts, reserve requirement ratio cuts, and relaxation of the "four restrictions" in core cities are expected to be implemented. As these policies continue to take effect, there may be some room for an increase in new home transactions in the fourth quarter, with a potential increase of around 20% compared to the third quarter, maintaining a weak recovery. The overall annual transaction decline is expected to narrow to within 30%. As direct beneficiaries of the new policies, first-tier cities still have room for increased transactions in new homes. Secondly, cities like Nanjing, Wuhan, and Tianjin, which have experienced deep adjustments in the early stage and still have a good market foundation, are expected to show a slight increase in overall transactions and continue the trend of weak recovery. Finally, weaker second-tier and many third and fourth-tier cities, such as Nanning, Kunming, Fuzhou, Wuxi, and Changzhou, are still awaiting the transmission of heat from core cities. The real estate policies in these cities are currently at a point where there is nothing left to deregulate, market confidence has hit rock bottom, and combined with insufficient purchasing power from residents, the overall real estate market will continue to face a longer period of adjustment. The second-hand housing market is still experiencing high-level fluctuations, with overall transaction momentum slowing slightly. However, due to the large base of first-time homebuyers and the strategy of exchanging price for volume by second-hand homeowners, the market resilience is slightly better than that of new homes. It is expected that overall transaction volumes in October will remain high. The source of this article is the WeChat public account "Ding Zuyu Evaluates the Real Estate Market," GMTEight Editor: Liu Xuan.