As we move further into 2025, the trajectory of China's real estate market appears to be shiftingFollowing a series of supportive policies initiated by the government, the notable decrease in real estate sales that had characterized previous years is beginning to taper offIn January 2025, a clear narrowing of the decline was observed, with housing prices starting to show encouraging signs of stabilizationThis newfound optimism is especially evident in land auction markets within major cities, where competitive bidding has resulted in record-breaking floor prices.

Looking back, January 2015 saw the sales reductions of the top 100 property companies drop to single digits, reflecting a significant improvementThis is especially significant given the downward trajectory that lasted throughout late 2024. The local legislative sessions that have concluded across various provinces have also highlighted the real estate sector as a key focusLocal governments are emphasizing the need to not only stabilize but also promote healthy development of the market, indicative of the priorities for the year ahead.

As policies are set in place, it becomes evident that transitioning the real estate market from a phase of decline to one of stability is not simply a swift endeavorIt necessitates coordinated efforts across both central and local governments to ensure smooth transitions from an increase in volume to a stabilization in pricesThe recent commentary from Goldman Sachs encapsulates this sentiment, suggesting that since September 2024, the softening of policies has already revealed early signs of recovery within the sector.

A critical factor influencing the real estate landscape is the interplay between land prices and housing pricesJust as bread and flour are vital to baking, the stabilization of property values is intrinsically tied to the pricing of land

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The onset of 2025 has already ushered in a series of positive reports regarding land transactionsThe gradual warming of the land auction markets, with many plots fetching premiums, provides a buoyant foundation for the long-term stabilization of housing pricesComplementarily, improvements in land supply have emerged, particularly in provinces like Guangdong and Beijing, where local governments are actively issuing special bonds for land acquisitions, paving the way for more interventions to stabilize land prices.

The data released by leading real estate firms like CRIC points to a notable rebound in the marketJanuary 2025 saw the top 100 property companies generating sales of approximately 227.6 billion yuan, a minor decline of 3.2% year-over-year, signaling a continuation of the market's stabilization trendFor context, in contrast, January 2024 had registered a staggering 34.2% decline compared to the previous yearIn December 2024, the total sales amounted to about 451.4 billion yuan, reflecting a steady stagnation.

Furthermore, statistics from China's National Bureau of Statistics indicate a significant drop in sales area for new residential properties, with a reported decrease of 12.9% for the year 2024. The residential space segment deteriorated further, declining by 14.1%. The overall sales figures for newly constructed residential properties reflected a similar plight, leading to a decreased total revenue of 96,750 billion yuan—a drop of 17.1% year-on-year.

In examining the trends, it is clear that the once steep declines in sales volumes are curtailing significantly towards the tail end of 2024, with broader signs of a steady recovery as we move into 2025. The drop in sales area from earlier months of 2024 consistently exceeded 15%, which has now moderated to nearly 10% for the yearThis transition indicates not only a recovery but also the framing of a promising outlook going forward

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Additionally, the price trends displayed a noteworthy stabilization, with new home prices in January showing a year-on-year increase of 2.76%—a major shift when compared to previous downturns.

In January, 47 cities recorded a month-on-month uptick in home prices, while 41 witnessed declines, illustrating a unique balance in the market dynamicsThe volume of transactions is also declining less dramatically than it did earlier, with new home transactions in 40 cities showing a reduction of 8% year-over-year but a notable increase of 8% when seasonal effects from the Spring Festival are excluded.

In tandem with the home sales recovery, the auction segment of the real estate market is heating up as wellNotably, the premium rates for land secured in January 2025 reached their highest since 2022. This resurgence in the land auction market is evidenced by a 7.1% year-on-year increase in the land value acquired by the top real estate firms, reflecting a shift from a previously declining trend.

Beijing recently exemplified this trend with a competitive land auction in Chaoyang District, where a residential mixed-use plot was secured by a consortium led by Poly Developments for 8.73 billion yuan, achieving a premium rate of 10.5%. The fierce bidding, with over a hundred rounds exchanging hands, speaks to the high demand and competition in the land market.

Other cities, including Shanghai, Shenzhen, and Hangzhou, are witnessing similar competitive land sales this yearA recent example occurred in Hangzhou when a site was auctioned off for 5.456 billion yuan after 220 rounds of bidding, establishing a record for land price per square meter for the city.

The emerging recovery in major metropolitan areas serves as a bellwether for the entire real estate sector

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Typically, once the market begins to show signs of recovery in first-tier cities, second and third-tier cities follow suit in an expanding cycleAs such, the stabilization of the housing market in first-tier cities is pivotal for broader recovery across the country.

At the local level, government initiatives are increasingly focused on facilitating recovery in the housing marketReports from governmental meetings around the country have highlighted the necessity of bolstering the real estate sector to meet the housing demand in urban and rural settings alikeBeijing's government work report for 2025 emphasizes the need for continuous optimization of real estate policies to yield a more supportive market environment.

Similar reports from Shanghai underline the importance of enhancing residential quality, introducing multifaceted housing solutions, including leasing and purchasing optionsThe overarching strategy is aimed at maintaining market stability and fostering healthy growth.

More regional governments, including those in Guangdong, Zhejiang, and Chongqing, are setting goals to stabilize their real estate markets moving forwardAlleviating housing excess is becoming a paramount focus, as statics from the National Bureau of Statistics highlight that at the end of 2024, the area of unsold residential properties saw an increase of 10.6% year-on-yearThis oversupply underscores the need for immediate intervention.

As we analyze the factors contributing to the market's ability to recover, experts note that the current cycle of declining sales is unprecedented in scale, unlike prior episodes of economic stressInitiatives focusing on de-inventory strategies are essential in paving the path to regaining market confidenceLocal governments are increasingly turning to innovative solutions such as land ownership reform and structured debt issuance to combat excessive inventories.

Looking ahead, the issuance of special bonds by local governments for land acquisition is expected to provide critical support in stabilizing the real estate sector

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