No cheer for developers as China’s new home sales projected to fall 15% in 2025: Fitch
At about 2.03 per cent, rental yield is still way below the benchmark home mortgage financing rate to spark investment in new homes
New home sales could drop by about 15 per cent to 7.3 trillion yuan (US$1 trillion) next year, it said in a report on Thursday, reflecting a 10 per cent decline in gross floor area sold and a 5 per cent drop in average selling prices. Excess inventory and low rental yields are among major reasons for the poor outlook, Fitch said.
Sales are forecast to fall by 12 per cent this year, according to the ratings company, following a 26 per cent slide in each of the past two years.
“Without a widespread expectation of home price recovery to drive a rebound in investment housing demand, China’s annual new home sales are likely to fall further in 2025,” Fitch said. “New rounds of supportive policies have stabilised near-term property market sentiment, but sentiment remains fragile.”
The sector still faces several structural challenges, including a high inventory of unsold homes, an uncertain job market environment and low housing affordability. Beijing unveiled several initiatives in late September, including lowering mortgage financing costs, to restore demand for housing. It also reduced taxes on property transactions and set up additional funds for local authorities to acquire millions of unsold homes.
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Fitch expects Chinese homebuyers to focus on economic fundamentals when deciding to buy a home, especially rental yield. Rental yield in 50 key mainland cities rose to 2.03 per cent in the first half of 2024 from 1.96 per cent in 2023, it added. That is too low to spark investment in new homes, given the benchmark rate for home mortgage loans stands at about 3.6 per cent, according to Fitch.
