Further policy loosening accelerates release of upgrade demand

• The market showed a weak recovery trend in October and November. Divergence was seen in the sales of different projects. Demand for high-quality projects in core areas remained strong. A total of 1,509 luxury apartment units were sold in the quarter, up 6.0% q-o-q. The annual sales volume in 2023 increased by 2.9% y-o-y.
• On 14 December, Beijing introduced new housing policies to stabilise market expectations, including a reduction in down payment requirements, lower mortgage interest rates, and an adjustment to its definition of ordinary housing in an attempt to improve housing affordability and stimulate demand.

New supply continues to decline

• Luxury apartment supply shrank by 43.8% q-o-q in the quarter, with only three projects launched for a total of 913 new units. Meanwhile, cumulative new supply for the year recorded 4,586 units, down 52.3% y-o-y.
• The land market cooled in the quarter, with the premium rate falling by 3.2 ppts q-o-q. By November, the residential land supply in the core six districts decreased by 19.7% y-o-y, which may directly lead to a shortage of high-end residential supply in the future. 

Downward trend in high-end housing prices continues

• Towards the end of the year, the prices of some projects were lowered to increase sales. Luxury apartment prices dropped by 1.3% q-o-q in 4Q23. As supply increased in the Secondary market, sellers with upgrade demand chose to reduce prices for quick transactions, causing Secondary prices to decline 1.5% q-o-q. 
• Leasing markets showed seasonal declines at the end of the year. Rents fell by 1.0% q-o-q but were flat y-o-y. The long transaction period in the Secondary market saw some properties originally intended for sale being converted to rentals. As supply increased, tenants gained more bargaining power.

Outlook: Sales to remain optimistic, supported by favourable policies

• The recent policy loosening is expected to restore market sentiment and boost buyer confidence. Developers are forecast to speed up launches to keep up with the approaching traditional peak season in March. New projects and the gradual release of demand may support sales stability in the next quarter.
• Luxury apartment prices are predicted to stabilise and recover, driven by new projects. In the mid to long term, as the supply of high-end land shrinks, prices are expected to maintain a steady upward trend.