- Since the Politburo’s emphasis in its September 2024 meeting that authorities “must work to halt the real estate market decline and spur a stable recovery,” Chinese mainland residential market sentiment has strengthened significantly, supporting a pick-up in primary market home sales
- Total investment volume in the Greater Bay Area (GBA) commercial real estate (CRE) market recorded RMB44.7 billion in 2024, accounting for 20% of total Chinese mainland CRE investment volume
- The industrial/ logistics sector became sought-after, accounting for 22% of total investment volume in the GBA, with transaction activity in second-tier GBA cities performing notably well
GBA Residential Market
Overall GBA residential market sentiment remained cautious in the first half of 2024 due to the economic slowdown in the Chinese mainland combined with a lack of confidence in the real estate market. Although overall GBA primary market residential transactions picked up in June following the introduction of the “517” new housing policies, the market then gradually digested the favorable impact in the subsequent months, failing to bring a sustained stimulus to residential transactions.
In late September, the Central Government then emphasized at the Politburo meeting that authorities “must work to halt the real estate market decline and spur a stable recovery”. Unlike the “517” new housing policies, which mainly targeted the demand side, this time the policies were designed to stimulate the market from both the demand and supply sides. The Central Government also introduced real estate measures summarized as “four cancellations, four reductions, and two additions,” aimed at lowering the cost of entry for buyers,and boosting the market’s confidence in developers’ capital flow by encouraging local governments to use funds from special-purpose bonds to reclaim and acquire idle land and unsold units. Since October, the residential market has become more active, with transaction numbers picking up significantly. Around 40,000 transactions were recorded in the GBA primary residential market in October, growing 70% m-o-m. Transactions through Q4 showed a strong recovery, growing 42% y-o-y and 72% q-o-q, with new home sales in Shenzhen and Guangzhou surging 165% and 72% respectively over the same period last year. These figures reflect that with the support of favorable policies, residential transaction activity in the Greater Bay Area is gradually recovering. Although total primary market transactions for the full-year 2024 reached approximately 318,000 units, a 16% y-o-y drop from 2023, the decline was concentrated in the first three quarters. (Chart 1).
Chart 1: GBA First-Hand Residential Sales
Primary market home prices are more swayed by the quality level of newly launched projects, and first-hand residential prices in the nine GBA Chinese mainland cities showed a mixed trend in 2H 2024. Secondary market home prices generally better reflect current underlying trends, and National Bureau of Statistics data shows that Shenzhen secondary home prices had been in a correction of -9.2% for the first nine months of 2024. However, since the Central Government introduced a series of stimulus measures for the real estate market in September and October, in particular the special-purpose bonds to improve developers’ cash flow, the sales price index of secondary market residential buildings in Shenzhen has stabilized, with m-o-m increases of 0.7% in October and 0.5% in November. We expect the price index in December to record similar growth to November, narrowing the annual decline to 7.7% (Chart 2).
Chart
2:
Change
in
Shenzhen
Secondary
Home
Price
Index
Alva
To,
Cushman
&
Wakefield’s
Vice
President,
Greater
China
&
Head
of
Consulting,
Greater
China
said,
“In
reviewing
the
easing
policies
introduced
in
2H
2024,
the
Central
Government
has
not
only
stimulated
housing
demand
but
also
strived
to
stabilize
supply.
Among
the
measures,
we
believe
the
policy
of
encouraging
local
governments
to
use
funds
from
special-purpose
bonds
to
reclaim
and
acquire
idle
land
and
unsold
units
is
the
most
noteworthy.
This
is
expected
to
help
developers
improve
their
cash
flow
and
liquidity,
in
turn
strengthening
market’s
confidence
in
developers’
deliveries,
while
also
ensuring
a
stable
housing
supply.
Only
with
the
gradual
restoration
of
market
confidence
can
the
purchasing
power
stimulated
by
easing
policies
be
truly
unleashed.
Looking
ahead
to
2025,
we
believe
that
the
most
challenging
time
is
over
and
that
the
property
market
is
now
gradually
stabilizing
with
the
support
of
the
Central
Government’s
policies.
With
the
support
of
favorable
policies,
transaction
numbers
are
likely
to
be
maintained
at
the
current
level.
We
forecast
that
total
first-hand
residential
transactions
in
the
GBA
will
increase
by
20%
to
around
380,000
units
in
2025,
supporting
the
gradual
recovery
of
home
prices.”
GBA CRE Investment Market
Charli Chan, Cushman & Wakefield’s Deputy Managing Director, Head of HK PRC Team, Capital Markets, said, “After significant downward asset price adjustments in the middle of the year, the GBA CRE investment market began to show a trend of stable recovery trend from Q4 2024. The GBA CRE investment market (large-sized deals at RMB100 million or above) recorded 66 deals totaling RMB44.7 billion for the full-year 2024, decreasing 9% y-o-y, accounting for 20% of the overall Chinese mainland investment market (Chart 3). Of the 66 large-sized deals, 15 were above the RMB1 billion mark, accounting for 23% of the total number of transactions, up from 20% in 2023. The GBA commercial property investment market continued to focus on the two first-tier mainland cities, Shenzhen and Guangzhou, recording total transaction volumes of RMB23.9 billion and RMB14.6 billion, respectively.
By property type, the office/R&D office sector continued to take the largest share of the market, accounting for more than half of the total investment volume for 2024. The share of the industrial/ logistics sector increased notably, from 9% of total investment volume in 2023 to 22% in 2024, chiefly driven by logistics demand spurred by cross-border e-commerce activities (Chart 4). This trend is also in line with the firm’s forecast six months ago.
Chart
4:
Total
CRE
Investment
Volume
in
the
GBA
by
Property
Type
Charli
Chan
added,
“Looking
ahead
to
2025,
investors
are
likely
to
remain
cautious
in
the
current
market
conditions.
The
abundant
new
supply
of
industrial,
logistics,
and
office
premises,
combined
with
relatively
few
buyers
in
the
market,
is
going
to
lead
to
increased
competition,
bringing
downward
pressure
on
property
prices.
However,
the
low
interest
rate
environment
in
the
Chinese
mainland,
and
with
further
rate
cuts
anticipated,
is
expected
to
offset
the
downward
pressure
to
a
certain
extent.
Property
prices
are
expected
to
remain
generally
stable
in
2025.
“In terms of property type, the logistics sector currently remains the top choice for investors. However, Guangdong is facing a supply boom in the coming two years, which may exert pressure on rents. Neighborhood retail assets and community malls are expected to remain sought after, and industrial parks are also attracting greater market attention with the benefit of relatively long-term tenants. Yet, investors are advised to adjust their strategies in a timely manner, considering the effectiveness of the ‘Industry’s Going Upstairs’ (IGU) policy and the actual market situation. Among all asset classes, the office sector has experienced the greatest price pressure. We suggest investors to pay attention to projects held by U.S. dollar funds that are willing to offload assets with price discounts.”
Please click here to download photos.
Caption:
Alva
To,
Cushman
&
Wakefield’s
Vice
President,
Greater
China
&
Head
of
Consulting,
Greater
China
(Left)
and
Charli
Chan,
Cushman
&
Wakefield’s
Deputy
Managing
Director,
Head
of
HK
PRC
Team,
Capital
Markets
(Right).
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