Residential real estate sales in China continued to slide in September, as the government’s attempts at rekindling demand so far seem to have had little effect on market sentiment.
Chart shows the decline in sales of all buildings, including commercial and residential
Sales of new homes were down 10.8 percent from January through the end of September, compared to the same period last year, with the total value of new housing sold amounting to RMB 4.05 trillion ($661 billion), according to figures released today by China’s National Bureau of Statistics.
The pace of decline in sales showed only a slight moderation from the mark set during the first eight months of the year, when sales were down by 10.9 percent. Considering the efforts that China’s government has made to stoke demand by loosening policy restrictions and unleashing mortgage credit, the continuing slide gives credence to some analysts who are saying that the current downturn may be unstoppable.
Developers Also Becoming More Cautious as Construction Slows
The message about the housing market seems to be getting through to many developers as land sales have fallen off and new construction starts are also down.
Sales of all types of land were down by 4.6 percent compared to the same period last year (Source: NBS)
The lack of enthusiasm for new projects comes as China copes with a sustained downturn in its housing market that has seen average home prices falling for at least the last four months according to the National Bureau of Statistics. The Bureau estimates that average home prices have fallen 11 percent so far this year.
It’s not surprising then that the total floor space of new residential buildings started during 2014 is off by 13.5 percent compared to last year, to 917.54 million square meters. The lack of new groundbreakings is also likely due to an increasing reluctance of the nation’s banks to lend to real estate projects, as the sector begins to be viewed with increasing skepticism.
The effect of the slowdown is being felt even further up the pipeline as the amount of land purchased by developers for new projects decreased by 4.6 percent in 2014, compared to the same period last year, reaching just 240.14 million square metres. Although land sales often come in spurts, the results for January through September 2014 decelerated by 1.4 percentage points faster than the amount of land sold in January through August, when compared to the same periods in 2013.
Still 4.7 Million Square Metres of Space in the Pipeline
While it’s clear that China’s developers are losing their appetite for new projects, one of the biggest problems facing these companies is the amount of space that is already under construction and still in the pipeline. Many estimates put China’s backlog of unsold homes at about two years at the current rate of sales, and during the first nine months of 2014, 433 million square metres of new homes were completed, which only exacerbated the current glut.
The rate of growth in real estate investment fell to 12.5% (Source: NBS)
Now according to the Bureau of Statistics, despite the decline in new construction starts, another 4.79 billion square metres of homes are still under construction, a figure which still shows an 8.1 percent rise over the amount of homes underway at this point last year.
With the real estate market continuing to slide and several billion square metres of new housing on the way, the potential for a rapid turnaround looks less likely than ever.
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