is China’s property market turning a corner?

In Wuxi, west of Shanghai, buyers are swapping old homes for new developments. In Guangzhou, southern China, and Beijing, the capital, first-time buyers are taking advantage of falling prices to snap up second-hand homes. Yet in north-western Shaanxi province, salespeople are facing pay cuts because properties are not selling.

After more than three years of crisis, there are some signs of life in China’s property market. Sales picked up in October for the first time this year after policymakers launched their biggest monetary stimulus since the pandemic. Beijing is preparing to launch the next phase of its stimulus this week.

Buyers, cheered by signals of government spending, are starting to return. At Jingyue Mansion, a development on the outskirts of Shanghai, 188 new apartments, the first phase of sales, sold out in late October. “They relaxed [policies], and now we can buy,” said one buyer surnamed Chen in the gleaming showroom, referring to restrictions imposed in recent years to tame runaway prices.

Getting the property market moving again is crucial to President Xi Jinping’s hopes of restarting robust growth in China’s economy, which has struggled in the wake of the pandemic and is now at risk of missing a full-year target of 5 per cent, according to analysts. Property previously accounted for more than a quarter of economic output, but the government reined in the sector in 2020 amid fears over leverage.

The anticipated fiscal package — in addition to the monetary stimulus unveiled in September — would mark Beijing’s biggest concerted intervention to stem a slowdown that tipped major property developers into default and undermined confidence in the world’s second-largest economy.

“In the past three years, the sector has had a few false dawns,” said Larry Hu, chief China economist at Macquarie, pointing to government support efforts in early 2022, June 2022, early 2023 and May this year. “Each time the housing market initially rebounded on policy easing, but weakened soon [after].”

There are signs of green shoots: sales at China’s 100 biggest developers rose year on year last month, while new home prices also ticked higher. Despite the burst of optimism, interviews by the Financial Times across six cities show lingering doubts about the sector’s longer-term prospects.

While some cities have eased restrictions on purchases to spur sales, such moves are often incremental. In Beijing, for example, non-residents in late September were permitted to buy properties inside the Fifth Ring Road if they had paid tax in the capital city for the past three years, down from five previously.

In Wuxi, an affluent city less than an hour from Shanghai, developers of one government-backed 11-tower development under construction were expected to allow buyers to sell their homes to the government in exchange for equivalent discounts on a new property.

But “there are very few customers in the market nowadays,” said salesperson Fei Xiaoxing. “People are not at ease.”

“Ordinary people are not earning money and simply ‘keeping warm and full’,” he added, an expression commonly used to mean spending the bare minimum on subsistence.

In Xi’an, in central Shaanxi province, a giant development under construction still has properties on the market 18 months after launching sales. While 20 apartments were sold in October after the first stimulus announcement, compared with an average of 10 a month, the market had been extremely difficult, according to a salesperson who added that her salary had been cut 40 per cent.

“Usually, in the first month of a project opening, one [sales]person can sell 20 apartments,” she said. “But now my whole team struggles to sell 20 apartments between them in a month.”

In China, most people have traditionally bought homes before they are built, a practice that leaves them vulnerable to the collapse of developers.

This has encouraged a shift to existing properties, where more market-driven price falls have made buying more attractive. Data from the China Index Academy showed second-hand home prices in 100 cities fell 7.27 per cent year on year in October, the highest level on record.

In Guangzhou, in southern China, which completely lifted restrictions on home purchases in late September, Jackie Chen, a doctor, is making his first purchase, of a three-bedroom, second-hand apartment, for just under Rmb5mn ($700,000). “In the short term, it may be stable, but in the long run, [the market] will continue to fall,” he said, pointing to China’s declining population. Stimulus measures would “just slow the decline”.

In neighbouring Foshan, Zhou Jiafu, an estate agent, said Guangzhou’s relaxation of purchases by non-residents had hurt smaller cities, where buyers might have otherwise looked for bargains. “The market has fallen constantly,” he said. “[The stimulus measures] have no real effect, good or bad.”

Even in Beijing, several agents said that while buyers were returning, prices had yet to recover. In Haidian district, known for its universities, properties recently sold for Rmb80,000-Rmb110,000 a square metre, down from a listing price of Rmb140,000 at the end of last year and Rmb200,000 at the peak. “Some owners are very eager to sell and are open to negotiating,” said a sales agent.

Another Beijing agent who focuses on higher-end properties said the market was “warming up”, but there was no sign of price increases. “Many people are still waiting,” she said, “as the policy doesn’t significantly impact everyone”.

The fiscal stimulus announcement from the standing committee of the China’s rubber-stamp parliament, the National People’s Congress, is expected to address land purchases and refinancing of debts for local governments, which rely heavily on land sales for revenue. But there is little expectation of measures directed at households, rather than institutions. 

“Consumer and homebuyer confidence remains low,” said Macquarie’s Hu, adding that the stimulus measures to date were “not enough to reflate the economy”.

For now, Li, 35, who works in the garment industry, is buying his third property in Guangzhou.

“We Chinese feel a sense of security when buying a house — we don’t invest haphazardly,” he said. “It’s just that I don’t know what to do with my money. There’s nothing to invest in.”

Reporting by Thomas Hale and Wang Xueqiao in Wuxi, William Langley in Guangzhou, Joe Leahy and Tina Hu in Xi’an and Wenjie Ding in Beijing