Red Star News:

How were real estate investment and sales in the first quarter? Have the measures introduced in some places to guarantee the delivery of housing projects and promote real estate financing taken effect? What is the outlook for the industry in the future? Thank you.

Sheng Laiyun:

Thank you for your questions. The real estate market is of great concern to everyone. Based on real estate investment and sales in the first quarter, the housing market is still in the process of adjustment. Regarding real estate issues, there are a few points to consider:

First, the decline in real estate sales indicators expanded in the first quarter of this year, which can be attributed to the high base of comparison last year. As I mentioned earlier, real estate sales saw a "mini-boom" in March due to special circumstances last year. The sales area of newly built commercial housing in March was approximately 138 million square meters, the highest among all months last year. The growth rates of new commercial housing sales and sales area in April were the fastest in the 12 months of last year. The sales area of newly built commercial buildings in March this year was 113 million square meters, which was about 25 million square meters less than in March last year. The year-on-year growth rate is slowing down. However, I also compared the total real estate sales volume in each month after June last year and found that the total real estate sales volume in March this year was higher than the absolute level in each month in the second half of last year. This suggests that while real estate sales in the first quarter of 2024, especially in March, did experience a decline due to the high base of comparison from the same period last year, the absolute amount is not low.

Second, the effects of policy measures supporting the stable development of the real estate sector are continuing to manifest. Let me provide you with a few pieces of data: Regarding the "three major projects," after the Central Financial Work Conference last year, both the central government and local authorities accelerated the progress of the "three major projects," which included the building of government-subsidized housing and dual-use public infrastructure that can accommodate emergency needs, as well as the redevelopment of urban villages, amid efforts to foster a new development model for the real estate sector. Data shows the "three major projects" have boosted real estate investments by 0.6 percentage point, demonstrating their effectiveness. The second set of data pertains to the positive impact of the "white list" mechanism on financing amounts for compliant real estate projects. As we know, this year, in order to address financing difficulties faced by real estate enterprises, relevant departments have introduced policies to support financing projects included in the "white list." According to first-quarter data, the decline in domestic loans for real estate enterprises narrowed by 1.2 percentage points, directly credited to the application of the financing policies associated with the "white list" mechanism. The third set of data concerns real estate sales. This year various localities have intensified their efforts to support the stable development of the real estate sector, including measures such as relaxing purchase restrictions and lowering interest rates for housing provident fund loans. Moreover, over 30 cities have implemented selling-old-for-new schemes. As a result of local governments' collective efforts, the decline in both the sales area and sales volume of newly built commercial housing in the first quarter narrowed by 1.1 percentage points and 1.7 percentage points, respectively, compared to the January-February period. These three sets of data demonstrate the continued apparent impact of policies supporting the stable development of the real estate sector.

Lastly, I would like to emphasize that we should have a rational perspective on this round of real estate adjustments. I also shared some views on this issue during the press conference in the third quarter of last year. On one hand, after more than two decades of rapid expansion, the real estate sector is undergoing a needed adjustment according to the growth cycle of the sector. The current adjustment in the real estate sector is beneficial to the subsequent establishment of new models for its high-quality development. As the traditional production capacity is cleared from the market, developers can build better houses and provide better services, which is also beneficial for consumers. Furthermore, China's ongoing urbanization serves as a fulcrum to support its real estate market. As of 2023, the urbanization rate of the country's permanent residents was 66.2%, but the urbanization rate in terms of registered permanent residents was still less than 50%. There are 180 million rural migrant workers who have not yet gained permanent urban residency, and the proportion of home purchases in cities among these migrant workers is not high. Among our existing housing stock, small- and medium-sized units below 90 square meters still account for the vast majority. With the improvement in people's living standards and further promotion of urbanization, the overall rigid demand and need for improved housing remain sufficient. The Chinese real estate market still has the conditions to support its sustainable and healthy development. We need to rationally view the current round of real estate adjustments. Thank you.