China's housing market will adjust to long-term change

Significance

Developer financing fell 25.9% last year. Property sales have slowed due to zero-COVID restrictions and consumer doubt about developers’ reliability, especially after some firms failed to deliver pre-sold homes. Commercial housing sales fell by 26.7% last year, and property developers defaulted on CNY150bn (USD22bn) of onshore bonds and USD30bn of offshore bonds.

Impacts

• First-time homebuyers’ share of purchases will decline, replaced partially by relocations and home improvements.
• Residential services such as refurbishments, rental services and property management will grow.
• Room for growth still exists in cities and subdistricts with robust population inflows.
• Certain second-tier cities stand out, such as Hangzhou, Zhengzhou and Dongguan, and demand in first-tier cities will remain robust.
• Smaller cities are more likely to suffer from population outflows, vacant housing stock and downward price pressures.