This past year was the worst on record for Chinese developers and the market for new home sales they serve in China. Now, with signs of bottoming out and the fledgling recovery, investors are looking towards the future and wondering what form the normalised housing market will take.

The big picture

It is hard to tell to what degree one should attribute the almost 30 percent drop in new home sales in 2022 to the credit curbs that started in mid-2020 with “three red lines” restricting developers’ credit access based on three financial ratios, or to the COVID lockdowns that paralysed the markets from early 2022. In our view at Real Estate Foresight, the latter proved to be the biggest factor affecting homebuyers’ confidence, income and employment situation.

Regardless, the policy change in November and December 2022 was major and sudden. The end of “zero-COVID” and the new policy support for the property sector boosted the market. This