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China Housing Market Update for 2015: Home sales surge in top cities while inventory and investment cause concern across the country

Wayne Iversen

By Wayne Iversen


February 10, 2016

china economyDuring 2015 there has been much talk about China’s excess housing inventory, where a number of newly finished properties remain uninhabited. Indeed, during the 2015 Forest Sector Mission’s daytrip to Dalian, many delegates noted how many condominiums in this coastal city stood empty; the question on everybody’s mind was “Is the Chinese property market really doing this poorly?”

So how did the market perform in 2015? The most recent released data from China’s National Bureau of Statistics (NBS) indicates that in 2015 the annual growth of real estate investment value has decreased to 1%; this growth is very low when compared to GDP growth (6.9%) and fixed asset investment growth (10%). The 14% year-on-year drop of housing starts in 2015 reflects the lack of confidence among developers and the pressure to release existing housing inventories. On a positive note, however, housing demand remains strong as the total sales area and value of commercial properties in 2015 went up 6.5% and 14.4% respectively. The challenges of the Chinese real estate market can be summarized as:

  • High existing inventory
  • Lack of confidence among developers (?) and,
  • Sluggish industry investment.

High Existing Inventory 

The Chinese central government has clearly signaled on several occasions that the top priority in the real estate industry in 2016 is to reduce the number of unsold homes especially in third- and fourth-tier cities that have very high housing inventory.

The central government’s agenda in 2016 under the branded term “supply-side reforms,” in the first year of the 13th Five Year Plan has also clearly indicated an official push for the clearing of property inventory, including such measures as further hukou (permanent resident identity) reforms and encouraging developers to either implement discount pricing or develop rental markets.

Earlier, some provincial governments, such as Shandong and Liaoning, were allowed to purchase residential ‘inventory projects’ to use in local affordable housing projects, instead of new construction.

On Feb 2nd 2016, China’s central bank announced that the required mortgage down payment in the cities without purchase restrictions will be reduced to 20 percent from 25 % for the first-home buyers. The new policy aims to support the property market and reduce the stockpile of unsold homes.

The data from the NBS shows that gross floor area (GFA) of new housing completed but still not sold in 2015 hit another historic high of 718.53 million m2, representing a growth of 15.6%. These completed but unsold units plus those 7.36 billion m2 units currently under construction can provide 266 million people with an average 33 m2 living space per person. According to a report from Chinese Academy of Social Sciences (CASS), annual sales have been hovered around 1 billion m2 (around 11 billion ft2) over the past three years; this implies that it could take close to four years to clear such inventory.

However, while much of the country is struggling, housing prices in Shanghai and Beijing increased by 14 and 12 percent per year, respectively. According to CBRE, this growth was likely stimulated by interest rate cuts and lower down payments for first-time buyers. The average price in the remaining Chinese cities fell by 3 percent, highlighting the stark contrast between the property market in first tier cities and the remainder of the country.

Lack of confidence among developers

In 2015, the acquisition of land has dramatically reduced 31.7% to only 228.11 million square meters which indicates the lack of confidence of real estate developers.  The Developer’s pessimistic prospect view on the future market also can be reflected by the low housing starts and housing completed area number in 2015 which have dropped 14% and 6.9% respectively to 2014.

According to various media reports, some of the largest mainland and HK developers have gradually retreated from the real estate market. Large developers such as China Resources Land, Country Garden and Longfor Properties have pulled out from recent land auctions, as land prices in major cities continue to rise. Another example is China’s leading commercial real estate developer Wanda, which has revised/downgraded its sales target from 1.6 trillion RMB for 2015 to 1 trillion RMB for 2016; the company has taken additional measures to diversify its business in order to rely less on income from real estate.

Sluggish investment in real estate development 

In 2015, year-on-year growth of investment in real estate development experienced a dramatic drop, sliding to only 1%. Real estate has been the engine fueling China’s fast economic growth, but it has now become a dragging force causing economic slowdown.


real estate growth














So what will 2016 bring to China’s property market? According to the Wall Street Journal, the government is likely to roll-out further supportive measures as real-estate investments continue to remain sluggish and housing sales remain slow. Construction starts are also likely to remain slow for the third year in a row due to existing housing inventory problem, and Beijing is expected to introduce measures to address excess supply in many areas of the country.  


沈晓杰 (January 20th, 2016). 2016:中国楼市难成经济“新支柱”. FT 中文网 (Financial Times China). Retrieved from:

China Daily (November 5th, 2015). Shanghai, Beijing in world’s top 10 for housing price growth. China Daily USA. Retrieved from:

Fung, Esther (December 23rd, 2015). 5 Predictions for China’s Housing Market in 2016. Wall Street Journal, blogs. Retrieved from: