Colliers International: The month-on-month decline in prices of both new and second-hand homes narrowed in October, and it is expected that the supply and demand relationship in the housing market will continue to stabilize.

Cushman & Wakefield Real Estate Research released an article saying that on the morning of November 15, the National Bureau of Statistics announced the macroeconomic and real estate industry data for the first 10 months. At the real estate industry level, thanks to the strong promotion of the "market stability" policy by the central and local governments, the sales area and amount of commercial housing have significantly improved, new construction and development investment have stabilized at a low level, and completion scale has shown a positive signal, with a narrowing of month-on-month price declines for both new and second-hand houses, and second-hand house prices in 11 key cities have shown an increase. For development investment and new construction, benefiting from the implementation of idle land acquisition and land value-added tax exemptions, the industry's enthusiasm for development investment is expected to rebound, and it is expected that both new construction area and development investment growth rate will show marginal improvement. Focusing on industry data, Cushman & Wakefield Real Estate believes that indicators such as sales and completions are expected to continue to improve in November: favorable policies for various sectors are still being continuously introduced in November, and the replacement chain for new and second-hand houses is continuing to recover. It is expected that the sales area and amount of commercial housing will continue to remain at a high level for the year, and the cumulative year-on-year decline will further narrow, and the improvement in industry funding will also promote the continuous improvement of completion indicators. Policy favorability stimulates the confidence of supply and demand, and the signing of pre-sale agreements for commercial houses rebounds month-on-month During the National Day holiday in October, enterprise marketing efforts were significantly enhanced, leading to a significant improvement in sales volume. In addition, with the support of incremental policies during the month, as homebuyers' confidence returns, sales of high-quality residential properties and cost-effective essential products in core areas have significantly improved. According to the Ministry of Housing and Urban-Rural Development's data on pre-sale agreements, in October, the transaction volume of commercial housing in China increased year-on-year for the first time since June last year, following a continuous decline. According to statistics from the National Bureau of Statistics, the sales area and amount for the first 10 months decreased by 15.8% and 20.9% respectively, narrowing by 1.3 and 1.8 percentage points from the previous month. The expected rebound of the new housing market in October is first and foremost attributable to policy improvements. The China Merchants' Association has successively issued statements three times during the month to stabilize the real estate market, and the combination of "four cancellations, four reductions, and two increases" has effectively boosted market confidence. Secondly, high-quality residential properties in various regions entered a period of intensive sales, leading to a release of demand from a large number of potential buyers who had been waiting for improvements. Thirdly, enterprises have effectively seized the marketing opportunities this month, with a significant increase in inventory clearance and marketing efforts, resulting in an average of 1/3 of units being sold on the first day of opening in typical cities this month, a 6 percentage point increase compared to the previous month. Slowdown in price decline for new and second-hand residential sales in 70 cities, with 11 cities seeing a month-on-month increase in second-hand house prices Looking at the price index trends of new and second-hand residential properties in 70 cities since January 2021, the downward trend in prices in October has significantly slowed down. Overall, new housing prices have decreased by 7.0% compared to the beginning of 2021, while second-hand housing prices have decreased by 16.1%. The month-on-month decrease in the price of new housing was 5.1%, with 3 additional cities seeing a month-on-month increase, while the month-on-month decrease in the price of second-hand housing was 4.8%, with 11 cities seeing an increase in house prices compared to the previous month, making it the month with the highest number of cities with a month-on-month increase in second-hand house prices since the second half of 2023. In fact, in October, the transaction area of second-hand houses in key second-tier cities increased by 30% month-on-month, while the transaction area of new houses increased by 40% month-on-month. The speed of improvement in the transaction volume of new houses is significantly better than that of second-hand houses. The fundamental reason for the increase in the share of second-hand housing transactions since 2021 is not only the continuous increase in the size of existing homes but also the impact of the cooling industry expectations, leading some families to reduce the number of homes they own, disrupting the transaction chain of selling second-hand houses and buying new ones. Now, with the improvement in industry expectations, as well as the completion of asset allocations, coupled with the increased construction of high-quality residential properties in various regions, the return of improving demand, and the rebound in the proportion of new house transactions is inevitable. However, from a price perspective, compared to the pressure faced by the supply side of new houses, second-hand house owners are more sensitive to prices, and with deeper price declines in previous periods, the rebound in the month-on-month price index during the market recovery is more prominent for second-hand houses compared to new houses. New construction remains stable at a low level, with a significant narrowing of the year-on-year decline in completion area From January to October, the construction area of houses by real estate development enterprises was 7.2066 billion square meters, a year-on-year decrease of 12.4%. The area of new construction of houses was 612.27 million square meters, a decrease of 22.6%. Among them, the area of new construction of residential buildings was 445.69 million square meters, a decrease of 22.7%. The area of completed buildings was 419.95 million square meters, a decrease of 23.9%. Among them, the completion area of residential buildings was 307.02 million square meters, a decrease of 23.4%. The year-on-year decrease in the new construction area remained stable at around 20% in the first 10 months. The industry is still in a critical period of destocking and stabilizing the market. Before the construction area falls back to an appropriate scale, the continuous low level of new construction is conducive to the sustained stability of industry development expectations. In October, the completion area of real estate enterprises was 51.79 million square meters, an increase of 51% month-on-month, a decrease of 20% year-on-year, with a 11 percentage point decrease in the year-on-year decline. The cumulative year-on-year decrease was 23.9%, narrowing by 0.5 percentage points from the previous three quarters. The rapid progress in engineering this month is not only due to seasonal factors in October but also due to the rapid progress of local "building delivery." However, in comparison to the stabilization of the year-on-year decline in sales data, completion area is significantly affected by factors such as construction period and previous development scale. With the injection of government debt funds and the implementation of land acquisition and storage, along with the improvement in industry funding, the year-on-year indicator of completion area is expected to continue to improve at the end of the year, further helping to stabilize industry development expectations. Investment in the first 10 months decreased by one-tenth year-on-year, with a decline in the speed of development of existing land promoting supply-demand balance From January to October, the total investment in real estate development nationwide was 863.09 billion yuan, a year-on-year decrease of 10.3%, with a 0.2 percentage point increase in the decline compared to the previous three quarters. However, the scale of land transactions continued to rise this month, with the operating land transaction area in 300 cities nationwide in October reaching 107.08 million square meters, a 29% increase month-on-month, breaking through 100 million square meters for the first time this year. The inconsistent trend between development investment and land transaction scale is partly due to the fact that some land transactions in the period have not yet been converted into investment data for statistics, while it also indicates that the development intensity of existing land is continuously decreasing. A moderate decline in the growth rate of development investment indicates a slowdown in the formation of new housing supply from existing inventories, which is beneficial for accelerating the recovery of the industry's balance between supply and demand. In summary, Cushman & Wakefield provides the following assessment for the future:In November, based on the continuous favorable policies at the central and local levels, especially the three aspects of tax reduction and exemption by the Ministry of Finance, both first-hand and second-hand housing, enterprises, and property buyers have brought substantial benefits, promoting housing replacement and enhancing the confidence of enterprise investment. In addition, the issuance of relevant documents by the Ministry of Land and Resources on land acquisition and storage provides policy guidance and work basis for various regions to use special bonds for land reserves, initiating the recovery and acquisition of idle land. This also accelerates the reversal of industry inventory risk expectations.Based on the trend of transactions in the first half of November, the transaction volume and sales of new developments in key cities remain at a high level for the year. In addition, since October, the proportion of second-hand housing transactions in key cities such as Chongqing and Guangzhou has decreased, and the listing of high-quality residential properties has attracted more demand from home buyers to the new housing market. It is expected that the confidence of home buyers will steadily rise towards the end of the year, and the supply-demand relationship in the new housing market will continue to stabilize.