Impact of Coronavirus on China’s Real Estate Market?

Under the attack of the “Black Swan – coronavirus”, China’s Spring Festival holiday has been extended. Many industries have been forced to suspend work. Closed sales galleries, canceled events, new projects with pending construction etc., all let us fell the chilly wind of China’s real estate market. So how on earth does the coronavirus affect China’s property market? 

How big is the coronavirus impact?

The Spring Festival holiday is a traditional warm-up season for housing, especially in third-and-fourth-tier cities. Many people cannot afford a house in big cities, so they will choose to buy a house in their hometown instead. Many real estate developers also chase the chance to provide discounts and promotional deals to boost selling.

All the offline activities in China were canceled to minimize the gathering of the public. Procedures of the property industry chain were postponed such as marketing, events, construction, housing, and so on. The real estate market is caught in a short term- “Shock”. According to statistics from the CCPR., the transaction volume of most developers has plummeted by 95% compared to the previous Spring Festival, and the market has fallen into a freezing point.

However, the “Shock” may only be temporary, a brokerage real estate analyst pointed that, the transaction volume of the first two months accounted for less 10% of the annual year according to the last 10 years data, and the housing demands will not disappear but only postponed.

Will the real estate regulation be loose?

Most of China’s real estate company adopt the policy of high turnover rate of capital to operate, because of the coronavirus, all the plans have been suspended, the funds can’t be received in the short time, so the tight cash flow of property companies will pose certain risks to the operation of the whole industries. Guo Jingli, Dean of Academy from Dongfang real estate institute, thought that the real estate control policies will be loose to help its recovery.

At the same time, Yi Pengfei, Director of Research Center of Chinese Academy of Social Sciences pointed that, the position of “house just for living” and the target of “ stable house price” and “stable expectation” don’t be changed, but to deal with the attacks of the coronavirus on real estate industry, the local real estate policies will be adjusted appropriately based on the cities.

Will the house price decrease?

The stagnation of transactions will inevitably make housing companies feel more pressure on funds during the coronavirus. To successfully sign contracts, price reduction promotions are the choice of many enterprises, especially for the housing companies in third-and- fourth-tier cities, missed the selling season of the Spring Festival, decreasing price is the easier way for them to return the funds.

Bai Yanjun, General Manager, R & D Center, China Index Academy, thought that the spread of the coronavirus will make consumers more cautious about their future expenditure, especially houses purchase, which will affect the transaction of the houses in 2020. However, Li Pengfei emphasized, the coronavirus doesn’t change the overall trend of China’s real estate, because of the existence of house buying demands and the increase of city groups, but the house price will decline slightly in the first and second quarters.

Someone thinks that, after a short-term decline, the backlog of demand will be concentrated in the real estate market, which will lead to a retaliatory rise in house prices? But who knows? What’s your opinion about that? If you have any questions or want to discuss with us, please leave us a comment below or email us: contact@ideamake.cn.

 

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