Facing a glut of unsold housing, the Chinese government has made reducing the country's large inventory of homes a priority in 2016. It's part of an effort to foster a recovery in the real estate sector and stabilize economic growth. The situation offers both challenges and opportunities to real estate firms. Experts noted that government policies will continue to buoy the market as companies seek to reduce their inventories.
A saleswoman, surnamed Tang, sighed as she hung up her phone on Wednesday at a real estate company in Guiyang, Southwest China's Guizhou Province.
It was the fifth straight refusal she received that afternoon.
Because her employer had a large amount of unsold properties in its inventory, Tang had tripled the number of her daily sales calls in recent months.
"The business is as cool as the weather, and many of my colleagues chose to leave for first- and second-tier cities, where the market is better," Tang told the Global Times on Wednesday.
Such is the situation in many of China's third- and fourth-tier cities, reflecting the sluggish domestic property market in 2015.
Given the current economy, a severe imbalance exists in China's property market. It's a combination of a shortage of houses in first-tier cities and an oversupply in smaller cities, the Xinhua News Agency reported on December 3, citing a housing market report released by the Chinese Academy of Social Sciences (CASS).
Experts say the imbalance between supply and demand in first-tier cities is due to high housing prices, while apartments in third- and fourth-tier cities are in periodic oversupply due to large inventories and falling prices.
"Domestic real estate companies are reducing their inventories at a faster pace," said Chen Juntao, an analyst at Beijing-based market research firm Analysys International. "Reducing inventories is a priority for the central and local governments, as well as real estate firms, over the next three to five years."
New year's priority
China has made reducing housing inventories one of its economic priorities in 2016, according to a statement released at the Central Economic Work Conference, which wrapped up on December 21.
China will encourage developers to reduce home prices as part of efforts to reduce inventories, the statement said. The central government will also encourage developers to consolidate and change their marketing strategies.
There were 696 million square meters of housing on the market in China during the first 11 months of 2015, and the new home construction approached 1.4 billion square meters, according to data from the National Bureau of Statistics on December 12. The data implied that new homes continued to enter the market despite a large amount of unsold properties.
Experts have predicted that it will take 23 months to reduce China's inventory of completed housing and 4.5 years to digest the homes currently under construction, the Beijing-based Securities Times reported Monday.
The central government has introduced several policies including interest rate cuts and lower down payment requirements to prop up the real estate market. Reducing inventories will be the key goal for the sector over the next few years, experts said.
A new round of urbanization in the future could help drive demand for housing as more farmers move into cities, said Chen, the analyst from Analysys International.
"China has allowed all couples to have their second child, which could also be an effective measure to promote long-term housing demand," he told the Global Times on Tuesday.
In a short term, removing the restrictions on home purchasing in small and medium-sized cities could help cut inventories, said Yin Xufei, an industry analyst with the Shenzhen-based CIC Industry Research Center.
Yin told the Global Times on December 29 that the consolidation of unsold homes could be achieved through mergers and acquisitions of property companies.
