CRIC Real Estate: Expected increase in supply in February, strong demand and supply in first-tier cities will continue.

On February 11th, Ke Rui real estate published an article stating that the year-on-year supply in February has increased positively, and the overall enthusiasm for new listings is "more than enough." There is a significant differentiation in the market trends in cities of different levels: first-tier cities have a significantly better new listing enthusiasm than second-tier and third-fourth-tier cities. In February, the new listings in first-tier cities increased both monthly and annually, with a cumulative year-on-year increase of 44%. The supply in second-tier cities decreased monthly but increased annually, with a cumulative year-on-year decrease still within 10%. After the Chinese New Year, the supply in third-fourth-tier cities entered a sluggish period, with a monthly expected decrease of 50%, ranking first in different city levels in terms of year-on-year decrease. In terms of supply structure, the proportion of essential, improvement, and high-end products in key cities is 33%, 53%, and 14% respectively, showing a supply structure that is mainly focused on improvement with essential products as supplements. Nearly 60% of cities have their main supply in the central city. Looking ahead, Ke Rui believes that the year-on-year transaction volume in February will continue to increase, with market enthusiasm remaining at high levels. The expected sales rate of projects in 28 key cities in February 2025 is 32%, up 8 percentage points year-on-year. The effect of new policies in first-tier cities continues, with an expected sales rate reaching as high as 51%, marking its highest point in nearly a year. Scale: 28 cities' February supply increased by 28% year-on-year, with first-tier cities showing significantly better new listings than second and third-tier cities. According to CRIC's research, the estimated new supply of commodity residential properties in 28 key cities in February is 4.43 million square meters, a decrease of 21% month-on-month but an increase of 28% year-on-year, mainly due to the low base last February during the Chinese New Year holiday. In absolute terms, the overall enthusiasm of real estate developers for new listings is "more than enough but less than excessive," slightly better than the same period during the Chinese New Year in 2024 and 2022, but still lagging behind compared to the same period in 2023. In terms of city levels, the mode of "selling determines production" shows that first-tier cities have better new listing volumes than second-tier and third-fourth-tier cities. Specifically, The enthusiasm for new listings in first-tier cities remains high, with a month-on-month increase in new listings for February, leading to a cumulative year-on-year increase of 44%. Beijing and Guangzhou saw a phased increase in supply, with Beijing expected to have a supply of 640,000 square meters in February, with around 6,000 units from nearly 5000 new listings to enter the market. On the other hand, Shanghai and Shenzhen had slightly weaker supply, with Shanghai experiencing a period of low supply and only one project about to enter the market. Second-tier cities saw a decrease in supply month-on-month but an increase year-on-year, with a cumulative year-on-year decrease of less than 10% until February 2024. In absolute terms, cities like Ningbo, Chengdu, and Tianjin had a monthly supply exceeding 350,000 square meters. In terms of changes, cities that saw a simultaneous decline on a monthly basis were mainly weaker second-tier cities such as Qingdao, Zhengzhou, Kunming, and Nanning, where real estate developers' enthusiasm for new listings was generally average. On the other hand, cities like Ningbo, Hefei, Nanjing, and Xiamen saw a phased increase in supply, with monthly supply significantly better than the same period last year. After the Chinese New Year, third-fourth-tier cities entered a period of sluggish supply, with a monthly expected decrease of 50%, ranking first in year-on-year decrease among cities of different levels. Supply in February decreased by 67% month-on-month and by 54% year-on-year, with a cumulative year-on-year decrease of 25% until February 2025. Key cities in the Pearl River Delta and Yangtze River Delta saw an overall decrease, with Zhangzhou even expecting zero supply. Structure: Improvement-focused, with essential products as supplements; primary cities are the main supply force in nearly 60% of cities. Looking at the distribution of different types of products in the supply structure, the proportion of essential, improvement, and high-end products in key cities is 33%, 53%, and 14% respectively, showing a supply structure that is mainly focused on improvement with essential products as supplements. In terms of cities, (1) only cities such as Wuxi, Xi'an, Zhengzhou, and Shenzhen have a proportion of essential product supply above 60%, with Shenzhen's new policies significantly promoting the essential customer group, leading to an enhanced supply of essential products by real estate developers. (2) Cities like Shanghai, Suzhou, Quanzhou, Changchun, Xiamen, and Beijing continue to focus on improvement products, with the proportion all above 80%, and cities like Shanghai, Suzhou, Quanzhou, and Changchun having 100% improvement supply proportion. (3) Fuzhou and Xuzhou saw a significant increase in the proportion of high-end products this month, reaching 59% and 54% respectively. (4) Kunming had a supply that catered to both essential and high-end products, with a supply proportion of 37% for both. Looking at the distribution of different types of products in the supply structure in different project regions, the proportion of central city, suburban, and distant suburbs in key cities is 56%, 30%, and 14% respectively, with the supply focus this month still concentrated in the central city, followed by the suburbs, and the distant suburbs having the least supply. In terms of cities, cities like Quanzhou, Fuzhou, Wuhan, Zhengzhou, Kunming, Chongqing, Hefei, Beijing, Wuxi, and Xiamen all have a proportion of main city projects above 70%. Cities like Shanghai, Qingdao, Changzhou, Nanjing, Tianjin, and Suzhou predominantly have suburban projects, with the proportion all above 50%, while Ningbo's supply considers both main city and suburban projects, with a proportion of 40%. A few cities like Changchun and Changsha will continue to increase their supply in distant suburbs, potentially leading to an oversupply. Of note, Shenzhen saw a simultaneous increase in supply in both the central city and distant suburbs, with proportions remaining around 40%. Outlook: February supply continues to improve in quality and reduce in quantity; transactions turn positive year-on-year, and first-tier cities see increasing enthusiasm Assessing the supply in February and combining it with the current transaction characteristics of each city, a simple prediction for the future market can be made: the supply in February is stable with a slight decrease, compared to previous Chinese New Year months, showing that the enthusiasm of real estate developers for new listings is average. However, due to the increased proportion of improvement and high-end supply in the central city and trends in new project subscription performance showing a narrowing decline, together with a reduction in the year-on-year decrease in January and transactions that are relatively stable compared to last year (considering last February was during the Chinese New Year), it is expected that the year-on-year transaction volume in February will continue to rise positively. In terms of market enthusiasm, it may continue to fluctuate at high levels: according to CRIC monitoring data, the expected average sales rate of projects in 28 key cities in February 2025 is 32%, an increase of 8 percentage points year-on-year. It is worth noting that the effect of new policies in first-tier cities continues, and the overall market enthusiasm is expected to stabilize and increase, with an expected sales rate of 51% in February 2025, reaching its highest level in nearly a year. Ke Rui combines the regions where new listings were made in December in different cities and makes reasonable estimates based on historical sales data since 2024, with most cities expected to see an increase in new house transactions in February, with monthly increases concentrated between 20% and 30%. Among cities, under the favorable policies, Shanghai and Shenzhen are expected to continue their market heat in the short term, with Shanghai likely to see a small peak in mid to late February.In terms of transactions, the expected increase in new home transactions in Shenzhen in February is also around 10% month-on-month; while Tianjin experienced a low in transactions in January, combined with the trends of visits and subscriptions during the Spring Festival period, new home transactions in February may increase by 70%. Wuhan, Nanjing, and other cities that have undergone significant adjustments in the past are expected to see a weak recovery in the market, with an expected increase in new home transactions of less than 10% month-on-month.Overall, in February, the supply remained stable with a slight decrease compared to previous years during the Spring Festival month. Real estate companies have shown moderate enthusiasm in launching new projects, with the focus still mainly on high-quality projects in the main urban areas. Overall transaction expectations are expected to return to normal, while the resilience of the first-tier market remains strong, with high market activity expected to continue. Currently, the overall market is still in the stage of "stabilizing after a decline". First-tier cities have benefited from reduced supply and improved quality, combined with the continued effects of new policies, leading to a potential increase in market activity. However, for second and third-tier cities, the expectation is for further differentiation: cities like Chengdu, Xi'an, and Hangzhou, which were hot in the previous period, may see a slowdown in transaction growth; cities like Nanjing and Wuhan, which have undergone significant adjustments, are experiencing a weak recovery with limited growth in new home transactions; and for most inland third and fourth-tier cities without substantial favorable conditions, transactions are unlikely to see significant improvement. Looking at individual projects, hot sales are likely to be concentrated in core areas with strong project improvements and in sub-core areas with obvious price advantages in high-value demand projects. Under the "sales drive production" model, these two types of projects are also expected to become the focus of future supply.