Crucial real estate: Real estate industry stabilizes further in the first quarter, transactions in core cities becoming more active.

: Ke Rui Real Estate released an article stating that the real estate market has seen a mini-spring in early 2025 as expected, with the real estate industry further stabilizing. The year-over-year decline in the sales volume of commercial housing continues to narrow, and the number of cities experiencing price drops reached a new low since the second half of 2023. The inventory of residential housing for sale has seen a month-on-month decrease. In the first quarter of 2025, the land transaction volume was only about 60% of the new house transaction volume, and with the progress in land acquisition and development of idle land and existing housing, the expectations of real estate companies and buyers are continuously improving. Data released by the National Bureau of Statistics shows that in the first quarter, the sales area and sales amount of new commercial housing in 40 key cities increased by 1.2% and 4.4% respectively. Core city transactions are becoming more active, and the national real estate market prosperity index continues to rise. Thanks to the positive signals reflected in the current market demand and the support of fiscal policies, it is expected that local authorities across the country will further focus on improving industry inventory to meet supply and demand expectations. As the heat in the land market is transmitted to the new house and second-hand house markets, and the expectation of improvement spreads among cities, the resurgence in market activity is expected to appear more frequently across various indicators and in more cities. Confidence recovery and improved transaction data continue to be positive, with mini-spring appearing in first and second-tier cities In March, the new house market transactions were lively. The transaction volume in first and second-tier cities continued to grow year-on-year, with CRIC data showing that Beijing, Guangzhou, Shenzhen, Ningbo, Nanjing, Suzhou and other cities all saw year-on-year growth rates of over 20%. The introduction of improved projects in the core areas of Beijing led to increased supply, with monthly transactions exceeding 500,000 square meters, a 21% increase year-on-year in the first quarter. The enthusiasm of real estate developers in launching projects steadily increased in March, coupled with enhanced marketing efforts. The average opening and sale rate in 29 key cities in March was 45%, an 11 percentage point increase compared to the previous month and a 19 percentage point increase year-on-year, continuing the trend of recovery. According to calculations based on data released by the National Bureau of Statistics, in March, the sales area of new commercial housing nationwide was 110 million square meters, with sales of 822.2 billion yuan, both experiencing a year-on-year decline of only 1%. Since October 2024, the year-on-year decline in the sales area of commercial housing has been continuously below 5% for six months, the first time since the second half of 2021, indicating a clear signal of stabilization and recovery in demand. In the first quarter of 2025, the sales area of commercial housing decreased by 3% year-on-year, reaching a new low in cumulative year-on-year declines in nearly 21 months. Since March 2025, policies have been clarified multiple times to continue to promote the stabilisation and rebound of the real estate market, empowering the construction of good quality housing while also supporting urban renewal efforts. Local governments have been implementing market-stabilizing policies in various aspects such as housing loan quotas, down payments, tax reductions, housing subsidies, and old-for-new programs to protect the market. Demand-side indicators in core cities have shown initial signs of improvement. In the first quarter of 2025, there was a year-on-year increase of 17% in the total transaction volume of first and second-hand housing in core cities, with overall visits and subscriptions in March experiencing a general increase. It is predicted that the sales side of core cities will continue to recover in April. For cities like Wuhan and Nanjing that have already undergone deep adjustments in the previous period, the trend of market stabilization and recovery is expected to be more evident in the short term, with subsequent transactions likely to continue with the weak recovery trend of stabilization with slight increase. The number of cities experiencing a month-on-month decline in the price of new homes reached a new low, with first-tier cities seeing five consecutive months of month-on-month increases Looking at the price index trends of new residential and second-hand residential housing in 70 cities since January 2021, the rate of month-on-month decline in housing prices in March has narrowed to less than 0.2%. Data released by the National Bureau of Statistics shows that the year-on-year decline in sales prices of commercial housing in various cities continued to narrow, with a 5.0% year-on-year decline in the price of new homes and a 7.3% year-on-year decline in the price of second-hand homes, both experiencing a continuous decline for six months. Among them, the price of new homes in Shanghai rose by 5.7%, while Beijing, Guangzhou, and Shenzhen saw declines of 5.7%, 7.2%, and 3.9% respectively. In terms of month-on-month changes, in March, 34 cities saw a stop to the decline in the price of new homes, reaching a new high since the second half of 2023. The price index for new residential housing in first-tier cities has been in positive growth for five consecutive months. Among them, Shanghai and Shenzhen rose by 0.7% and 0.1% respectively, with Shanghai having the highest monthly rise in new home prices. Beijing and Guangzhou both saw a decrease of 0.2% and 0.1% respectively. The price index for new residential housing in second-tier cities remained stable compared to the previous month. The price index for new residential housing in third-tier cities fell by 0.2% month-on-month, a 0.1 percentage point narrower decline. There were 24 cities where the price index for new residential housing increased month-on-month, an increase of 6 cities compared to the previous month. Since November 2024, more than 20 cities have maintained stable or rising prices for new homes for five consecutive months, while ten cities saw an increase in the price index for second-hand housing month-on-month, an increase of 7 cities compared to the previous month. In March 2025, a special action plan to boost consumption for the first time put an emphasis on stabilizing the real estate market in consumer promotion documents, aiming to better meet the housing consumption needs and promote optimized tax and provident fund policies. At the same time, it addresses supply and inventory adjustments while accelerating the implementation of urban village and old housing renovation, as well as pushing forward the consolidation of special debt issuance. In parallel, the China Banking and Insurance Regulatory Commission made it clear in the middle of the month that they will increase the issuance of personal consumption loans. The central bank also mentioned the need to increase the revitalization of existing commercial housing and land to promote the stabilisation and recovery of the real estate market. Thanks to financial and tax support from the consumption side, as well as the improvement in supply and demand expectations due to reduced inventory and decreased land supply, more cities are showing signs of bottoming out in housing price indicators. The scale of new construction continues to remain low, and short-term inventory pressures are quickly easing From January to March, real estate development enterprises built 6,137.05 million square meters of housing, a year-on-year decrease of 9.5%. Among them, the construction area of residential buildings was 4,272.37 million square meters, down 9.9%. The new construction area of buildings was 129.96 million square meters, a decrease of 24.4%. Of which, the new construction area of residential buildings was 94.92 million square meters, down 23.9%. In March, the scale of new construction decreased by 18% year-on-year, a significant narrowing of 11.5 percentage points compared to January and February, but it is still much higher than the year-on-year decline in land transactions and sales of commercial housing during the same period. Facing the high heat in the land market since 2025 and the arrival of a mini-spring in first and second-tier cities, the industry continues to maintain a cautious stance in adding to inventory for sale. In direct comparison of the scale, this is also the case, with 63.82 million square meters in March.The newly started construction area of 10,000 square meters is significantly lower than the new house sales scale of 111,230,000 square meters, and the industry's short-term inventory pressure has quickly eased. In addition, with the decline in land transaction volume at the beginning of 2025, the transaction area in the first quarter was only 130 million square meters. Considering the unsalable parts such as matching construction and commercial self-occupation, the industry's destocking scale has reached about 100 million square meters, indicating that the long-term inventory scale of real estate has also entered a rapid decline space.In March 2025, the completed construction area of housing was 42.96 million square meters, a year-on-year decrease of 11.5%, narrowing by 4.1 percentage points compared to the previous month. In sync with the adjustment of the industry sales scale, the decrease in the completed construction area of housing is reasonable. The narrowing of the decrease in completion scale in March, and the year-on-year decrease being smaller than the 7.5 percentage points of new construction area, indicate the expansion of the industry white list and the progress of the battle to guarantee delivery of housing is proceeding as scheduled, and the potential inventory risk is also continuing to be cleared. The development investment amount has changed in the same way as land transactions, speeding up the arrival of the supply-demand balance point. From January to March, the national real estate development investment was 1.9904 trillion yuan, a year-on-year decrease of 9.9%. In March, real estate development investment was 918.4 billion yuan, a year-on-year decrease of 10%, expanding by 0.2 percentage points compared to the previous month. Behind the decline in development investment is the low supply and demand scale of land transactions at the beginning of 2025. Land transactions in the first quarter were 128 million square meters, a year-on-year decrease of 10%. On the one hand, this is due to the further reduction of fiscal budget dependence on local land finance. In 2025, the total revenue of local government funds budgets is 11.4 trillion yuan, half of which comes from central transfers and special debt income, with non-land transfer income accounting for a historically high proportion. On the other hand, it is also due to the determination of local supervisory departments to actively reduce inventory. According to the already published land supply plans, the average annual land supply plan in 2025 decreased by 20% year-on-year. The central and local governments further tighten supply expectations and accelerate the promotion of industry supply-demand balance. In the medium term, with the decrease in land transaction size, the scale of real estate development investment will also continue to remain at a low level. However, due to the impact of previous development project investments, there is a certain lag in the development investment quota, and the adjustment time of the development investment index will be slower than that of new house sales, primary and secondary house prices, new construction, land transactions, and other indicators. Looking at the historical industry investment-sales data ratio, before the real estate investment falls to a level matching the scale of commercial housing sales, the downward adjustment of this indicator will continue for one to two years. Ke Rui estimates that in the first half of 2025, the sales area and amount of commercial housing will accelerate bottoming out, and more major cities will see the stabilization of new house transaction volume. With the acceleration of measures to boost consumption and promote demand, as well as the further optimization of loan amounts, tax reductions, home buying subsidies, old-for-new policies by local supervisory departments to stabilize the market, it is expected that the expectations of home buyers will continue to improve, and major city housing prices will receive clearer positive signals, and the index of new house prices will also be perceived positively by more home buyers. In terms of investment and construction, based on the current stage of the industry in reducing inventory, supply-side continued reduction to boost investment enthusiasm, storing idle land and improving housing inventory pressure, accelerating the transformation of urban villages, and improving land utilization efficiency, it is expected that new construction and development investment will continue to be in a contraction adjustment cycle, and construction area will also accelerate towards a new supply-demand balance point.