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n a glimmer of hope for China's beleaguered real estate market, UBS analysts have detected positive signals that suggest the sector may be on the cusp of stabilization. According to John Lam, head of Asia-Pacific property and Greater China research at UBS Investment Bank, "we've seen some relatively positive indicators" after four or five years of a downward cycle.
One such indicator is the surge in secondary home sales in major Chinese cities, which have climbed by over 30% from last year on a weekly basis. This uptick is particularly noteworthy as it suggests that existing homeowners are increasingly willing to sell their properties, potentially paving the way for a broader market recovery.
UBS now predicts that China's home prices can stabilize as early as 2026, earlier than previously forecast. The firm expects secondary transactions to account for half of total sales by 2026, driven in part by rising rental prices and a premium on land values.
Chinese policymakers have been working to stem the decline of the property sector, which accounts for a significant portion of household wealth and has contributed substantially to the economy. Despite a flurry of measures aimed at stabilizing the market, real estate sales have nearly halved since 2021 to around 9.7 trillion yuan last year.
However, analysts are cautiously optimistic that the tide may be turning. In February, Macquarie's Chief China Economist Larry Hu pointed to three positive signals that could support a bottom in home prices this year: policy push, falling unsold inventory levels, and narrowing mortgage rates and rental yields.
Foreign investors are also taking notice of the potential opportunities in China's property market. Invesco has formed a joint venture with Ziroom, a Chinese company specializing in standardized apartment rentals, to invest in affordable rental housing developments. The partnership plans to initially invest 1.2 billion yuan in a 1,500-room development near Beijing's Winter Olympics site.
While these developments are encouraging, experts caution that the property sector is still far from recovery. Real estate investment fell by nearly 10% in the first two months of the year, and new home starts growth worsened to -29.6% in January-February. Without a sustained stabilization of the property sector, China's economy may struggle to recover.
Ultimately, the key to reversing consumer confidence lies in effective policy execution and a sustained commitment to supporting the market. As Sky Kwah, head of investment advisory at Raffles Family Office, notes, "you do not reverse confidence overnight."
