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The total number of new home transactions will hit about 400,000 deals this year, says Cushman & Wakefield
January 22, 2024 | Staff Reporter | China | Brokerage
New home sales in the Greater Bay Area (GBA) might increase by 5% this year compared with 2023, thanks to improving transport networks and the introduction of more favourable policies, international real-estate firm Cushman & Wakefield said. The total number of new home transactions will hit about 400,000 deals this year, the firm said on Thursday. The forecast comes as Guangzhou and Shenzhen – two of the biggest mainland Chinese GBA cities – have been rolling out a series of favourable home purchase policies since late August.
These measures range from reduced down-payment ratios for first-time homebuyers to extended benefits for more buyers. They are expected to help restore market confidence and drive up transaction volumes, thus helping residential property prices to stabilise in the first half of 2024, Cushman said.
“According to past experience, it usually takes some time for the market to digest and react to new policies,” said Alva To, Cushman’s vice-president and head of consulting for Greater China. “Therefore, although the residential transaction volume will not likely rebound significantly in the short term, it is expected that entry barriers for potential buyers can be eased under the relaxation of regulatory measures.”
he market bottomed out in August and – despite a 6.2% year-on-year drop for the whole of last year – has gradually been improving since, Cushman said. Home transactions rose 27% in November when compared with August, for instance. Among the 11 cities of the GBA, Huizhou performed particularly well, with a 14.1% increase in primary home sales. Other cities such as Guangzhou, Shenzhen and Zhuhai also recorded growth of around 3%.
Cushman said it also expects more Hong Kong buyers to purchase homes in mainland GBA cities, thanks to increasing connectivity within the development zone and the current strength of the Hong Kong dollar against the yuan, To said. US investment bank Jefferies, however, said in a report that Chinese property transactions, which dropped by 8.5% in 2023, should remain under pressure in the first half of this year amid further adjustments in average sales prices.
Despite more policy funding, supportive policies that continue to focus on stabilising the sector are unlikely to turn the market around in the near term, Jefferies said. Meanwhile, the total value of commercial real estate investment in the GBA reached 66.1 billion yuan, the second-highest level over the past five years, Cushman said. Such investment accounted for about 30% of China’s total, marking a significant jump from 18% in 2018, when the GBA initiative was first announced, while domestic capital accounted for 98% of the total number of deals.
“With the offshore yuan lending rates much higher than onshore rates, overseas institutional investors have often been restructuring their asset allocations amid a high interest rate environment, hence slowing their pace in the investment market,” said Charli Chan, Cushman’s executive director and head of capital markets in Hong Kong and mainland China. “In contrast, mainland capital sources including state-owned enterprises, end-use buyers and private investors are relatively active, seizing the opportunity to bottom-fish for long-term investment while property prices are more rational amid the relatively low borrowing rates in mainland China.”
