Sales rise amid a loose policy environment

• At the end of the quarter, developers stepped up promotions to boost their mid-year performance, driving sales growth. A total of 2,048 luxury apartment units were sold in the quarter, up 48.1% q-o-q but down 17.3% y-o-y.
• In June, the People’s Bank of China lowered the Loan Prime Rate (LPR) by 10 bps, the first reduction in ten months, aiming to lower the cost of housing and help stabilise the residential market. Local housing authorities in Beijing proposed a ‘one district, one policy’ initiative in the Fangshan District as a pilot to spur housing sales.

New supply remains low

• Limited by the reduction in land supply in the core area, the launch pace of new houses slowed down. No new supply was recorded in the quarter, which hit a five-year low. Under continued strong demand and sharply reduced supply, the market inventory continued to decline.
• The first batch of 26 land plots was finalised in June. The number of developers participating in the auctions reached a record high. The prices of many land plots hit the ceiling, showing the hot land market. Although central enterprises were still the main drivers, the participation of private enterprises and enterprises from other cities have increased.

High-end housing prices decrease slightly

• Luxury apartment prices fell 0.7% q-o-q in 2Q23. In addition to the slow destocking of projects, more projects offered discounts to boost mid-year performance.
• Active business travel and employment activities have translated into robust leasing demand, driving rents to increase by 0.9% q-o-q. Due to the return of foreign family tenants, the demand for large apartments has increased.

Outlook: Supply is expected to recover in the second half of the year

• In the short term, the market may continue to receive loose policy support, such as lowering loan interest rates, which may encourage wait-and-see buyers to enter the market. It is expected that high-end residential sales will remain stable in the second half of the year.
• As the first batch of land enters the market in the following quarters, market supply is expected to recover. Released demand should contribute to the maintenance of a stable upward trajectory in luxury apartment prices.