China’s new home sales slid on year during National Day holiday as housing market cools down further

China’s new home sales during the week-long National Day holiday declined significantly from a year earlier, led by sharp drops in lower-tier cities, as the housing market in the world’s second largest economy continues to cool down.

New home sales measured by floor space in 15 sample cities dropped by 33 per cent during the period of October 1 – 7 compared to a year earlier, as most potential home buyers are holding a wait-and-see attitude, according to the China Index Academy, one of the country’s largest independent real estate research firms.

The 15 cities include four tier-one cities, seven tier-two cities including Wuhan, Fuzhou and Jinan as well as four tier-three/four cities including Dongguan, Taian, Putian and Wenzhou.

In the four tier-one cities including Beijing, Shanghai, Guangzhou and Shenzhen, new home sales reached about 421,900 square meters during the seven-day period, largely in with with the level seen in the same period last year, showed the data.

Notably, in Shenzhen, new home sales jumped by 175 per cent year over year to about 109,900 square meters, mainly due to a surge in new home supply, said the academy.

“The data in Shenzhen included many home purchases already signed before the holiday, so it should only be taken as a reference and not an accurate reflection of real transaction situation,” said Li Maozhe, head of the Beike Research Institute’s Guangzhou Centre.

In contrast, new home sales in Shanghai and Guangzhou fell by 42 per cent and 8 per cent year over year, respectively, while new home sales in Beijing were about 157,400 square meters, largely in line with a year ago, according to the China Index Academy.

In the seven tier-two cities, new home sales totaled 353,200 square meters in the period, slumping by 43 per cent from a year ago, while new home sales in the four tier-three/four cities reached 136,800 square meters, plunging 44 per cent from the year-ago period.

Separate data from Zhuge Zhaofang Data Research Centre showed that, among the 15 cities it tracked, 11 cities saw new home sales decline year on year during the holiday.

The weak performance followed sluggish figures in September. Data from the China Index Academy showed that new home sales in major cities fell by 6.9 per cent in September from the prior month, slumping 35.6 per cent from a year earlier.

Some say the slide in the holiday was partly attributable to the high base in the same period in 2020 when pent-up demand was released as Covid-19 pandemic receded. Data from Zhuge Zhaofang Data Research Centre, home sales during the holiday exceeded 2019-level.

China’s new home market saw a sharp cooling down since the start of the third quarter, with prices and transaction volumes both sliding. According to official data, average monthly new home sales in the first half of the year stood at 147.7 million square meters. In particular, sales in July and August fell to 130.13 million square meters and 125.45 square meters, respectively, falling by 12 per cent and 15 per cent from the monthly average in the first half.

The number of cities that saw monthly rise in new home prices decreased to from 51 in July to 46 in August, the lowest so far this year, while the number of cities that logged new home price drops increased to 20 from 16, according to official data. The National Bureau of Statistics will release September figure later this month.

The cooling housing market came after authorities continue to tighten real estate regulations. According to statistics by Centaline Property, Chinese local governments had introduced 420 property policy adjustments this year as of September 15, a new record high for the same period.

In the fourth quarter of the year, some regions may slightly relax housing market regulations, which will likely lead to some improvement, but the overall policy environment will remain tough and more short-term correction are expected, said Chen Wenjing, deputy research director at the China Index Academy.