[para. 1] Recent years have seen a dramatic decline in the sales area of commercial residential properties in China, plummeting by over 53% from nearly 1.6 billion square meters in 2021 to an expected less than 750 million square meters by 2024. This decline has significantly contributed to the country’s economic slowdown. However, by October 2024, there are signs of a reversal in this trend. In November 2024, sales in 48 major cities increased by 19.7% year-on-year, a stark contrast to the previous months that had experienced a 20% decrease on average monthly.

[para. 2] The rebound in real estate sales, beginning in October 2024, has been most pronounced in China’s first-tier cities, where sales growth reached 46.4% year-on-year in November. This rebound can be attributed to policy relaxations and these cities’ perceived investment value. However, second- and third-tier cities saw only modest growth, reflecting market volatility and suggesting that the current growth might not be sustainable. Moving into 2025, real estate sales are expected to stabilize rather than drop further, although the strength of recovery remains uncertain.

[para. 3] Even with improving sales, a lag in the construction sector means that real estate investment and project scales will likely continue to decline into 2025. Historically, sales improvements lead to an increase in new construction projects within the same year, but ongoing projects depend on the previous year’s scale minus completions. If sales and new projects see only slight growth in 2025, it’s expected that ongoing projects will still see a decline, albeit at a slower rate compared to 2024.

[para. 4] Real estate investment, crucial for GDP calculations via the expenditure approach, is set to decline again in 2025, though the rate of decline will narrow, positively influencing GDP, though not overwhelmingly so. Long-term prosperity in the real estate market is challenged primarily by demographic shifts, such as a declining number of people reaching marriageable age and having children due to longstanding policies and changing social preferences. Marriage, historically driving housing demand, decreased from over 13 million couples in 2013 to over 7 million in 2023, with little immediate prospect for recovery.

[para. 5] The demographic trend also impacts childbirth rates. Despite policy relaxations since 2015, societal changes have led to fewer births, from nearly 18 million in 2016 to 9 million in 2023. Coupled with lower marriage rates, this further reduces motivation for larger housing purchases. Urbanization, another traditional driver of real estate growth, has slowed, with new urban residents decreasing significantly from nearly 30 million in 2011 to 12 million in 2023. Many migrants struggle to afford major city properties, pointing to further declines in potential purchasing power.

[para. 6] Future real estate demand will increasingly depend on income growth. However, government support for quality productivity ensures supply remains ample, with areas possibly facing overcapacity, leading to low inflation or deflation. Without significant governmental policy changes in income redistribution, household income growth will remain tepid. Consequently, it is difficult for commercial housing sales to return to 2020-2021 levels. A more achievable expectation is for the sales area to stabilize and possibly rebound to around one billion square meters by 2030.

AI generated, for reference only