As we delve into the intricate dynamics of the real estate market in China, it’s essential to take a step back and consider the significant events that have unfolded since late 2021. The dramatic collapse of Evergrande, a major player in the industry, marked the beginning of a tumultuous period for the property sector, which has now extended beyond three yearsThis period has been punctuated by alarming alerts from various property developers, illustrating an industry-wide crisis that has touched various facets of society.

Initially, the collapse of giants like Evergrande, Sunac, and Country Garden led to widespread panic among stakeholders, dismantling the previous belief that some developers were "too big to fail." As the crisis deepened, government interventions began to emerge, offering a glimmer of hope through a series of stimulus measures

However, these policy initiatives have met with a mixed response, reflecting an underlying realization among the populace that real estate prices might not only stabilize but could potentially decline.

By the time we reached 2024, a noticeable dip in transactions emerged during the initial months and again in the later part of the year, further emphasizing the challenges facedUrban areas struggled with a "spiral downward" trend when it came to volume and priceIn a bid to tilt the scales, regulators introduced comprehensive policies targeting various facets of the marketThis included reductions in down payments, mortgage interest rates, and taxes, as well as relaxing restrictions on property purchases, which peaked during specific timeframes in May and again in September.

Meanwhile, the fourth quarter of 2024 saw signs of life in several key provinces, as cities like Beijing, Hangzhou, Guangzhou, and Shenzhen recorded impressive month-on-month increases in second-hand home sales

Hangzhou witnessed particularly striking numbers, surpassing 10,000 units sold—a phenomenon that suggests either a recovering market or dangerously unsustainable growthYet, by late November, there were signs that not all was well, as market enthusiasm appeared to wane in numerous regionsNevertheless, the closure of the year offered some respite, particularly for cities like Shenzhen, comparing favorably to the struggles of 2022.

As we turn our attention to 2025, questions arise regarding the future trajectory of housing pricesWill they continue to decline, or is there potential for stabilization? The outlook for price increases appears grim as the continuation of supporting policies is expected to stabilize transaction volumes but does little to provide certainty that prices will not sway back to previous lows.

The anticipated stabilization of housing prices hinges on various factors, among which is the adaptive response of the market to the ongoing stimulus efforts

Specifically, while certain first- and second-tier cities show potential for some price stabilization, other previously overvalued areas, such as Tianjin and Shijiazhuang, are starting to see slight recoveriesThe sentiment modeling a price-volume trade-off remains prevalent.

The recent uptick in trading volume can largely be attributed to the market's shift towards a volume-based trading modelVarious data sources, including that from the China Index Academy, indicate that during the first eleven months of 2024, the average price of second-hand homes across cities dropped approximately 7 percent, marking a significant downward trend that continued without interruption for over 31 months.

This mechanism of price-volume trade-offs seems to align with the regulatory vision of stimulating marketplace activityWith policies designed to attract incremental buyers, it becomes crucial for the market to witness both replacement transactions and new trades

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As one analyst closely connected to regulatory frameworks articulated, a stabilized transaction volume could herald a return of confidence in pricing structures.

While temporary dips in average prices across both first and second-hand markets signify some ongoing demand, the stark contrast is evident in less populated third, fourth, and fifth-tier cities that have experienced prolonged periods of inactivity in transactions despite higher listing pricesThe disconnect poses questions about the sustainability of these values.

The fundamental pillar supporting the housing market remains anchored in employment and revenue expectations, closely twisted with broader economic conditionsHomebuyers grappling with job insecurity or fears of salary cuts are less inclined to commit to substantial mortgagesConversely, cities that embody economic vitality and foster high-paying job markets generally witness healthier property prices.

An additional variable affecting market demand looms large; changing social trends with fewer marriages and a declining birthrate further compress the replacement demand for housing

The potential market for incremental homebuyers is thus constrained, depicting a challenging future.

Looking towards December 2024, the transaction figures will serve as a pivotal indicator; sustaining momentum in growth could validate recent policies aimed at invigorating the housing landscape.

Upon reviewing December’s performance, significant variances emergeBeijing's sales exceeded 21,500 units, showcasing a remarkable 15 percent increaseHowever, cities like Guangzhou and Hangzhou exhibited declining transaction activity, hinting at a possible overheating that necessitates a recalibration of expectations.

In anticipation of the future, renewed policy efforts are set to enhance market recovery, with the national housing work conference emphasizing the importance of stabilizing property pricesOngoing initiatives focus on revitalizing existing land and housing stock, which could usher in a steady recovery paving the way for sustained stability in the market.