China’s residential property sales by floor area are expected to decline by about 10% in 2023, with sales to drop about 20% in the first half of the year and to stay in line with 2022-level in the second half, according to a research note by UBS.
Official data showed that China’s residential property sales by floor area reached 1.15 billion square meters in 2022, sliding 26.8% from the year before, and based on that, sales in 2023 are expected to reach 1.03 billion square meters, according to the report.
By 2030, China’s long-term housing demand will shrink to 928 million square meters per year, the bank forecast. That’s compared to an average housing demand of 975 million square meters per year in the period of 2022 – 2030, it said.
In the past more than one year, the government has gradually relaxed restrictions on housing demand, but the policy stance “housing is for living, not for speculating” remains unchanged, and the latest round of policy easing and its effect on housing demand has been weaker than that in 2014 and 2015, according to the report.
The decline in home transactions has lasted for one year and a half and high inventory has reappeared in lower-level cities. According to data compiled by UBS, China’s property inventory has been climbing since July 2021 and in the first half of 2023, the inventory is expected to climb to 27 months.
According to data from the National Bureau of Statistics, China’s new construction starts of residential properties by floor area reached 881 million square meters in 2022, slumping 39.8% from the previous year and hitting the lowest level since at least 2011.
UBS believes that in 2023 and 2024, new construction starts will stay around 800 million square meters and by the end of 2024 or the start of 2025, China’s property inventory will return to the normal level in the past ten years.