Chinese Real Estate Outlook Bleak: New Home Prices May Stall Across the Board in 2023

According to a survey by Reuters,Which platform is better for foreign exchange China's new home prices are expected to show zero growth this year. This highlights the heavy pressure the troubled real estate sector is placing on the economy, forcing policymakers to race against time to rebuild confidence.

A total of 12 economists participated in the survey conducted from August 16-25, predicting a year-over-year growth rate of 0% for new home prices this year, compared to a forecast of 1.4% in May.

The real estate sector, an important component of China's economy, has been hit hard since last year. Due to liquidity constraints and regulations during special periods, developers have been unable to deliver presold housing projects on time, leading many homebuyers to threaten to stop mortgage repayments.

Xingping Wang, a senior analyst at Fitch Bohua, said that China's weak economic recovery and residents' conservative spending attitude indicate that confidence among real estate market participants has not yet been restored.

Over the past year, authorities have taken several measures to revive the real estate market, including reducing down payment requirements, easing mortgage conditions, and lowering mortgage interest rates. However, developers face long-term liquidity issues, and the overall economic slowdown leads to persistently low real estate confidence.

Real estate investment is expected to decline by 7.7% year-over-year, significantly more than the 4.2% decline forecast in May; residential sales by floor area are expected to decline by 5.0% in 2023 compared to the 2.7% growth forecast in the survey.

After experiencing the special mask period, the world's second-largest economy has seen a sharp weakening in growth momentum, dragged down by weak domestic and foreign demand, rising unemployment, and the real estate sector's troubles.

Hong Ma, an analyst at Zhixin Investment Research Institute, estimates that a 1 percentage point decrease in real estate investment could reduce the GDP growth rate by 0.1 percentage point.

Despite the government's timely measures, Chinese observers are skeptical about whether the real estate market can improve in the short term.

Last Friday, Chinese authorities issued detailed regulations allowing local governments to eliminate the "no mortgage record" requirement used to identify "first-time homebuyers."

First-tier cities are expected to relax real estate market restrictions in some suburbs, but Gao Yuhong, an analyst at CCXI, says that it is almost impossible to save the entire real estate market from its continued downturn.

Among the 12 economists, 7 believe that the purchasing power of first-time homebuyers will improve over the next year. However, Xing Zhao Peng, an economist at ANZ, says that youth employment will be a major obstacle for first-time homebuyers.

The government has suspended the publication of youth unemployment rate data, and analysts say the youth unemployment rate has reached an all-time high, partly as a symptom of regulatory crackdowns on real estate and other industries' large employers.

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