Recent figures from the National Bureau of Statistics covering January to August reveal a nuanced picture of China's property sector, with notable shifts in transaction dynamics and price trends. The data, which also includes August housing price movements across 70 major cities, indicates that while new home sales have declined, the overall market volume is finding a new equilibrium.
The total floor area of second-hand home transactions via online filing reached 549.23 million square meters in the first eight months of the year, marking a solid 10.6% year-on-year increase. In contrast, new commercial housing sales by floor area totaled 498.8 million square meters, down 12.1% from the same period last year. August data showed that first-tier cities saw a month-on-month uptick in new home prices, while the pace of decline in second- and third-tier cities generally narrowed. Year-on-year price drops across all city tiers also continued to moderate.
A key development is the shifting market structure. Official statements highlight that as the sector matures, the market is transitioning from a dominance of new home transactions to a greater reliance on existing home sales. This is a significant structural change, with second-hand home transaction volumes having now exceeded new home sales for several consecutive months. The increase in existing home purchases is helping to stabilize the total volume of housing market activity despite the slowdown in new builds.
Analysts attribute the sustained growth in second-hand home transactions to several factors. Existing homes are often distributed across more diverse areas, generally offer lower total prices and unit prices, allow for immediate occupancy, and provide greater convenience and lower costs in terms of surrounding amenities and commuting. These practical advantages are particularly appealing to buyers with rigid housing needs or those upgrading for family reasons, especially in hot markets.
Price dynamics also show signs of stabilization. In August, the year-on-year decline in new home prices narrowed in 38 of the 70 surveyed cities compared to the previous month, with the rate of decline improving by 0.2, 0.1, and 0.1 percentage points in first-, second-, and third-tier cities, respectively. For existing homes, the picture was even brighter, with 48 cities seeing a narrower year-on-year decline, led by a substantial 1.0 percentage point improvement in first-tier cities.
On a month-on-month basis, new home prices in first-tier cities turned positive in August, rising 0.1% from the previous month. This was largely driven by gains in Shanghai (0.4%), Guangzhou (0.1%), and Shenzhen (0.2%), although Beijing saw a slight dip of 0.2%. Cities like Shanghai, Wuxi, Xuzhou, and Shenyang were among the leaders in monthly price gains, a trend analysts link to stable transaction volumes and strong sales of higher-quality "good housing" products in these locations.
Recent policy adjustments, including new rules for commercial housing sales reform announced in late August, are expected to further support the market. These measures aim to optimize supply structures, balance supply and demand, and facilitate inventory reduction. The shift towards selling completed homes, offering "what you see is what you get" purchases, is seen as a way to better protect buyers' rights and stimulate new demand, contributing to a quicker recovery and stabilization of the new home market.
Inventories are also trending downwards. At the end of August, the total floor area of unsold new commercial housing was down 1.1% year-on-year, marking the sixth consecutive month of decline, with the pace of reduction expanding in recent months. The stock of homes unsold for under three years fell by a more significant 4.2%, indicating that measures to reduce short-term inventory are proving effective. These efforts have included purchase subsidies, trade-in schemes, and converting existing stock into affordable housing.
Officials note that the property market is undergoing a major transformation in supply-demand dynamics. The focus is shifting towards better meeting the diverse living needs of the population, which are evolving towards preferences for smart, green, and age-friendly housing. The old operational models are struggling to adapt to these changes, necessitating a faster transition to a new development framework. Reforms to the housing provident fund system and improvements to commercial housing sales and related regulations are part of the ongoing strategy to build this new model. The full implementation of these policies is anticipated to facilitate the sector's transition and better cater to the public's aspirations for improved living conditions.