The year 2024 appears to be particularly difficult for the real estate sector in China. Despite the redoubled efforts of policymakers to support this struggling market, investments and sales continue to fall to alarming proportions. This article examines in detail recent data and the actions put in place by the authorities to try to remedy the situation.
Recent data on real estate investments
From January to May 2024, the figures show a worrying trend:
Continued decline in investments
THE real estate investments in China decreased by 10.1% during the first five months of the year compared to the same period the previous year.
This drop follows an already notable decrease of 9.8% recorded between January and April 2024.
Fall in sales by surface area
THE real estate salesmeasured in terms of floor space sold, also saw a sharp decline.
The data indicates a 20.3% reduction in sales from January to May 2024 compared to the same period in 2023.
This reduction is slightly more pronounced than that observed between January and April where the drop was of 20.2%.
Public policy efforts
Incentives
Faced with this crisis, the Chinese authorities have implemented several measures to try to reinvigorate the real estate sector and restore consumer confidence:
- Reduction of interest rates : In order to stimulate property purchases, central banks have reduced mortgage interest rates.
- Support for promoters : Additional funds have been allocated to help real estate developers in financial difficulty.
- Transaction Facilitation : Simplification of administrative procedures to speed up sales and purchasing processes.
Limited impact of actions
Despite these initiatives, the expected impact is slow to materialize.
The persistence of the decline in investments and sales shows a lasting lack of confidence among investors and potential buyers.
Economic and social consequences
Impact on the national economy
The slowdown of real estate sector has significant repercussions on China’s overall economy, given its weight in the National GDP.
A continuation of this trend could lead to macroeconomic consequences such as:
- Economic recession : Reduced demand for raw materials and a loss of jobs in construction.
- Deflation : Downward pressure on property prices, leading to widespread deflation.
- Banking crisis : Accumulation of bad debts for financial institutions exposed to the real estate sector.
Social tensions
The fall in real estate sales and investments also directly affects Chinese households:
- Loss of asset value : Devaluation of goods owned by individuals.
- Financial uncertainty : Fear linked to the failure of promoters in charge of projects currently being carried out.
- Migratory movements : The lack of economic opportunities leads to population movements towards more prosperous areas.
Future prospects
Possible scenarios
In order to remedy the situation, certain avenues could be considered by the Chinese authorities:
- Strengthening support policies : Continuous improvement of the financial conditions granted to buyers and developers.
- Stimulating domestic demand : Initiatives aimed at increasing purchasing power and consumer confidence.
- Public-private partnerships : Promotion of collaborations between public and private sectors to relaunch innovative projects.
Role of foreign investors
THE international investors could play a key role in the recovery of the Chinese real estate sector, by easing regulations and offering attractive incentives.
The current crisis of real estate sector in China represents a major challenge for the national economy.
Despite a series of measures taken by the authorities, the decline in investments and sales persists, highlighting the need for more robust and diversified strategies to restore investor and consumer confidence.
It remains imperative to carefully monitor the development of this situation to anticipate its potential impacts both in the short and long term.
