In December, the real estate market concluded with a "tail-up" trend, and it is expected that there will still be positive year-on-year growth in the first quarter.
According to Zhitong Finance APP, the institutions released a report in December 2024 stating that due to the stability of policies boosting confidence, along with the end-of-year performance sprint of property companies, the supply and demand for new houses in December experienced a "tail-end" closing with continued low inventory under conditions of unmet demand. The total annual volume of new homes sold saw a year-on-year decline narrowing to 23%, while the second-hand housing transactions continued to strengthen, with transaction areas in December increasing by 46% and 11% respectively compared to the previous month and year, resulting in a cumulative year-on-year increase of 6%. The scale of land transactions showed a cyclical "tail-end," with construction area increasing by 132% month-on-month and the premium rate returning to the average level of the year, while the auction failure rate remained low. The institutions believe that in January and February 2025, influenced by the Spring Festival holiday, a month-on-month decline is highly probable, but considering the support of comprehensive policies and the current market transaction heat inertia, a small spring-like market in March is expected to continue, with the low base of 2024 indicating that the first quarter of 2025 will still see a positive year-on-year growth.
The new supply increased by 10% month-on-month, better than the average of Q3, with first-tier cities falling and second and third-tier cities accelerating supply expansion.
In December, new house supply steadily increased. The 30 key cities added 11.75 million square meters of new supply, a 10% month-on-month growth but a 16% year-on-year decline, with a 27% increase compared to the average of Q3, narrowing the annual cumulative year-on-year decline to 29%.
First-tier supply has decreased, with only Guangzhou showing a temporary increase. The overall expected supply area for the four first-tier cities is 1.99 million square meters, a 5% month-on-month decrease and a 33% year-on-year decline, albeit a 10% growth compared to the average level of Q3. Only Guangzhou has welcomed a temporary supply increase, with increases remaining in line year-on-year. At the end of the year, property enterprises generally strengthened the pace of launching new projects, coupled with the low base from the previous month, resulting in stable overall supply with an increase. Both Peking and Shenzhen saw declines, but Shenzhen's overall supply scale remains significantly better than the average of Q3, while Peking's supply fell to a low for the year, with the cumulative year-on-year decline expanding to 20%.
Supply in second and third-tier cities continued to increase, with a month-on-month growth of 14%, and a 31% increase over the average of Q3. A total of 26 key second and third-tier cities supplied 9.76 million square meters, representing a 14% month-on-month growth and a 12% year-on-year decrease, with a cumulative year-on-year decline of 30%. Among these, Chengdu and Wuhan maintained a supply scale of over 1 million square meters in December, keeping a cumulative year-on-year decline around 20%. The changes indicate a continuous intensification of fluctuations in second and third-tier cities: Xi'an, Wuhan, Hangzhou, Changsha, Zhengzhou, Hefei, and Xuzhou all saw month-on-month increases exceeding 50%, entering a concentrated replenishment period; while Jinan, Qingdao, Nanning, Fuzhou, Changchun, Ningbo, Huizhou, Zhuhai, and Changzhou all showed month-on-month and year-on-year declines, and property enterprises' enthusiasm for launching new projects didn't rise significantly.
In February, the volume of new home transactions increased by 15% month-on-month, reaching a new high for the same period in nearly three years, with the annual decline narrowing to 23%.
Thanks to the increased frequency of property companies releasing projects and intensifying marketing efforts at the end of the year, December saw a significant tail-end trend in transaction area. According to CRIC monitoring data, the overall transaction area in 30 key cities in December was 18.01 million square meters, up 15% month-on-month and 17% year-on-year, with an absolute volume level also increasing by 2% compared to December 2022, reaching the highest level for the same period in nearly three years, and an 86% increase compared to the monthly average in the third quarter, resulting in an annual cumulative year-on-year decline narrowing significantly to 23%.
The market heat in first-tier cities continues, with transaction volume in Peking and Guangzhou recovering while Shanghai and Shenzhen show slight fatigue. The four first-tier cities saw a slight increase of 1% month-on-month and a 35% year-on-year rise, growing by 80% compared to the monthly average in the third quarter, with a cumulative year-on-year decline of 11%. Aside from the month-on-month decline in Shanghai and Shenzhen, both Peking and Guangzhou recorded month-on-month increases, with Guangzhou's increase being significant, rising by 9% month-on-month and 39% year-on-year, and growing by 73% compared to the average in the third quarter, resulting in Guangzhou's transaction volume being roughly on par with last year. It is noteworthy that in Shanghai and Shenzhen, which were significantly impacted by earlier bullish policies, there was a month-on-month decline this month, indicating a diminishing effect of the new policies, and as the existing clients with short-term purchasing intentions continue to release, transaction growth also shows signs of fatigue.
Transactions in second and third-tier cities continue to fluctuate at low levels, with the cumulative year-on-year decline significantly higher than in first-tier cities. Cities can be classified into the following categories: (1) Cities with significant year-end tail trends include not only second-tier cities like Wuhan, Suzhou, Changsha, and Ningbo with good fundamentals, but also third and fourth-tier cities like Wuxi, Zhuhai, Xuzhou, and Jiaxing, which have experienced several months of low activity, with year-end housing demand experiencing a concentrated release. (2) Tianjin, Nanjing, and Kunming saw month-on-month increases all within 15%, below the average, ending the year steadily; (3) A few cities such as Xi'an, Jinan, Xiamen, and Huizhou continued to decline month-on-month, primarily due to a phase of fatigue following previous concentrated releases. Overall transaction levels continue to hover at low levels. It is noteworthy that the cumulative year-on-year decline in nine cities has narrowed to within 20%, with purchasing power in Tianjin continuing to recover and overall transactions showing a low rebound; while in Ningbo, Kunming, Xiamen, Fuzhou, Foshan, Changzhou, Jiaxing, Zhuhai, and most cities, the current transaction scale is basically close to the bottom.
In March, the average destocking rate of projects remained at 40%, with cities like Shanghai and Hangzhou seeing high volumes and quality of new launches with destocking rates exceeding 60%.
In December, the enthusiasm of property companies for launching new projects steadily increased, with a total of 311 openings and re-launches in 26 key cities, a month-on-month increase of 20%; market heat remained high, according to CRIC research data, with an average opening absorption rate of 40% in key cities in December, unchanged from the previous month and up 7 percentage points year-on-year; compared to the third quarter, the increase was 14 percentage points, continuing a weak recovery trend.
Looking at the cities, Shanghai and Hangzhou remain hot, with over 45 launches and average absorption rates stable at over 60% in December. Property companies in Wuxi, Xiamen, and others are more inclined to adopt a "sell to produce" approach, with only well-quality projects tending to speed up their launch pace.
In terms of trends, there are mixed month-on-month changes, with more year-on-year increases and fewer decreases. Cities with both year-on-year and month-on-month increases, besides the short-term hot markets of Shanghai, Peking, and Hangzhou, include more second and third-tier cities like Wuhan, Tianjin, Chongqing, Jiaxing, Wuxi, Changzhou, and Zhuhai, which have gone through prior deep adjustments and show a weak recovery trend; some cities such as Xi'an, Suzhou, Qingdao, Jinan, and Foshan have seen absorption rates decline instead of increasing due to the supply structure in December, continuing a stagnant market. Notably, there are significant signs of stabilization in the overall market, with only 6 of the 26 cities having a December absorption rate lower than the average for the third quarter of 2024, while most cities still show a steady upward trend in market heat.
The inventory supply-demand ratio was 0.65, leading to continued inventory decline, with cities like Shenzhen, Kunming, and Foshan experiencing a month-on-month drop in absorption periods.
In December, as the increase in supply did not match the transaction volume, the overall supply-demand ratio of the 30 cities fell from 0.68 to 0.65, with only Xi'an, Changsha, and Shanghai facing oversupply, while the remaining 27 cities had a supply-demand ratio below 1. The inventory area in the 30 cities was 224.24 million square meters, a month-on-month decrease of 3% and a year-on-year decrease of 7%.
The digestion cycle in 25 cities has shortened month-on-month, with declines mostly within 10%. Shenzhen faced supply constraints, while Chengdu saw steady transaction growth, resulting in a more significant reduction in the digestion cycle. Noteworthy are the cities of Shenzhen, Kunming, and Foshan, which have seen simultaneous month-on-month drops in digestion cycles; in absolute terms, there are currently 18 cities with digestion cycles exceeding 18 months, and as transactions recover, there are signs of gradually alleviating inventory digestion pressures.
In the second-hand housing market, the transactions increased by 46% and 11% month-on-month and year-on-year respectively, with an annual increase of about 20% in first-tier cities and cities like Hangzhou and Ningbo.
In December, the expected transaction area for second-hand houses in 35 key cities is 24.9 million square meters, which is an 11% month-on-month increase and a 46% year-on-year increase. The total accumulated transaction area for the entire year of 2024 is expected to be 226.95 million square meters, with a cumulative year-on-year increase of 6%.
In terms of month-on-month comparison, under a series of policies stimulating the market, the second-hand housing market remained hot in December. Excluding Peking, Xi'an, Hangzhou, Jinan, Hefei, Changchun, Dalian, and Weinan, the remaining 27 cities all saw an increase in transactions. Year-on-year, key cities experienced more increases than decreases, with core cities such as Beijing, Shanghai, and Shenzhen generally having transaction volumes higher than the same period last year. Shenzhen's volume doubled year-on-year, while Peking, Shanghai, and others had increases of over 60%. However, cities such as Kunming, Changchun, and Dalian showed significantly weaker transaction performances compared to the same period last year. Overall, the second-hand housing transaction continued to experience high-level fluctuations, with the main customer base concentrated in the price-sensitive first-time buyers and those making adjustments.
The transaction amount in the land market experienced a cyclical month-on-month increase, while year-on-year comparisons still showed a continued decrease of 20%.
In December, the land market saw the expected end-of-year transaction 'tail', while the supply side faced a seasonal decline. As of December 25, the land supply this month is 0.09 billion square meters, a 70% decrease compared to the same period last month, with transactions totaling 0.28 billion square meters, a 132% increase compared to the same period last month. However, the year-on-year transaction still maintained negative growth, with transaction amounts decreasing by about 20% compared to the same period last year. Various regions continue to control the scale of the primary market to promote inventory reduction in the industry. This month's land premium rate is 3.8%. Although Shenzhen, Hangzhou, and other areas auctioned multiple high-premium land plots, the increased transaction volume in third and fourth-tier cities and the rise in key project offerings at the end of the year led to an average premium rate that fell compared to last month, returning to the annual average level.
The performance of cities at all levels is similar, showing a significant month-on-month increase but a continued year-on-year decline. According to CRIC monitoring data, as of December 25, first-tier cities had a total land transaction area of 2.6 million square meters this month, which is a 128% month-on-month increase and a 27% year-on-year decrease. Specifically, Shenzhen transacted 0.33 million square meters this month, with a total transaction price of 19 billion yuan. In a hot plot in the Yuhai area of Nanshan District, the premium rate reached as high as 46.3%. In Peking, a land plot worth over 10 billion yuan was put up for sale in December, located in the Lize area of Fengtai District, starting at a total price of 11.05 billion yuan, and was successfully acquired by China Overseas at the base price. This is Peking's first no-price-limit land plot and the third land plot worth over 10 billion yuan since 2024.
In second-tier cities, as of the 25th, the traded construction area reached 50.04 million square meters, a month-on-month increase of 221%, but a year-on-year decrease of 19%. The transaction amount was 182.7 billion yuan, an increase of 130% month-on-month, but a decrease of 22% year-on-year. Specifically, this month Changsha had the highest traded construction area, reaching 8.03 million square meters, with a total price of 18.9 billion yuan and an average premium rate of 0.5%; Chongqing followed with a traded construction area of 5.99 million square meters, a total price of 13.1 billion yuan, and an average premium rate of 0.3%; Chengdu ranked third with a traded construction area of 3.59 million square meters, a total price of 12.8 billion yuan, and an average premium rate of 6.7%.
This month, places like Hangzhou, Hefei, and Chengdu have completed multiple high-premium land transactions, such as the Xiangshan North Gan East plot in Hangzhou, which had a premium rate as high as 76.5%, the highest premium rate for a residential land plot in Hangzhou since 2024. The removal of the price limit on new homes in Hangzhou fully released the premium space for this plot, and the floor price also set a new record as the second-highest in the Xiangshan District. On the same day, the Qiaozhi residential land in Hangzhou was also sold at a premium rate of 48.8%. This plot has a floor area ratio of 1.1, a total transaction price of 0.79 billion yuan, and a floor price of 0.018 million yuan/square meter, while the surrounding projects have an average selling price of around 0.03 million yuan/square meter.
In third and fourth-tier cities, as of the 25th, the total traded construction area reached 0.22 billion square meters, a month-on-month increase of 118%, but a year-on-year decrease of 17%, making it the smallest year-on-year decrease among all city levels. The average transaction price was 2154 yuan/square meter, a month-on-month decrease of 6%. After several years of leading the decline, the land transaction scale in third and fourth-tier cities has first approached the bottom. Under the premise of major project construction in the cities, the space for further declines in 2024 is relatively small, and a slight year-on-year reduction by the end of the year is expected. Among the 15 cities closely monitored by CRIC in third and fourth-tier cities, Xuzhou topped the list with a traded construction area of 6.29 million square meters, while Yangzhou, Yancheng, and Changzhou all exceeded 3 million square meters. Most cities still primarily conduct transactions at the base price or low premium, with cities exceeding 1 million in traded construction area this month averaging a premium rate not exceeding 3%.
Overall, due to the inherent market heat plus a low base, it is anticipated that in the first quarter of 2025, real estate transactions will see a month-on-month decline but a year-on-year growth.
In December, coinciding with the year-end rush, the overall situation in 30 key cities is still in a continued supply increase phase, with both supply and demand showing a tail-end finish. Looking forward, CRIC Real Estate Research anticipates that in January and February 2025, due to the Spring Festival holiday, a month-on-month decline is highly likely; however, supported by comprehensive policies and the current market trading heat inertia, a small upturn in March is expected to continue, considering the relatively low base in 2024, indicating a year-on-year growth in the first quarter of 2025.
From the perspective of city capabilities, first-tier cities continue to see trading heat, with overall transaction area slightly decreasing. Second-tier cities maintain stable transaction size, with a rotation recovery between strong and weak cities. Third and fourth-tier cities will continue to stabilize, but the overall adjustment is nearing the market bottom, with the decline also expected to continue narrowing. Notably, the resilience of the second-hand market remains stronger than that of new homes, yet the share is gradually leaning towards an increase in new homes. The diversion effect of the first-time homebuyer group will still exist; however, for improvement and high-end clientele, the upgrading of new home products combined with market-driven pricing will significantly attract customers back to new homes.
