Industry Focus >>Analyzing Chinese New Housing
Starts in 2023 and Expectations for 2024
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Article by Shervin Shahidi Hamedani

2023中國新屋開工統計及2024展望
Introduction

Hardware & Fastener Components - no.62/2024

China's housing market stands as a pivotal barometer of
its economic health, with new housing starts serving as a key
indicator of growth and development. Against the backdrop of a
rapidly evolving economic landscape, the hardware and fastenerindustries play a crucial role in the construction sector, ensuring
structural integrity and safety in building projects. This article
briefly explores the nuances of China's housing market in 2023
and provides insightful projections for 2024, which might behelpful for those involved in the fastener and hardware industries,
offering valuable perspectives on market trends and potential
opportunities for strategic positioning.

Analyzing Chinese New Housing
Starts in 2023

the pace of new residential starts for the first time on record.
If this trend persists, it has the potential to instil confidence
in the property market, fostering a more sustainable pace ofdevelopment.

Housing Starts and Completions in China in 2021-2023(Millions of Square Meters)

1600
1400

1463

1200
1000
800

730

881
618

600

693

725

400
2000

China's housing market woes have gained significant attention
in recent years, reaching a climax with fresh reports towards
the end of the previous year. These reports indicated that morethan half of listed property developers had either defaulted on
their obligations or restructured their public debts. Sales of newresidential properties in 2023 were sluggish, amounting to
only half the pace witnessed in 2021. Similarly, new residential
construction starts experienced a comparable decline.

The turbulence within China's property sector cameinto a sharp focus in mid-2021, notably with the emergenceof challenges faced by one of the nation's largest property
developers. Subsequently, other developers found themselvesgrappling with similar predicaments.

However, amidst the bleak outlook portrayed by these reports,
there were some encouraging developments that went unnoticed.
In 2023, completions of residential properties saw a notable
uptick, surging by 17 percent; however, housing starts havedeclined by more than 21% compared to 2022. The total area
completed reached nearly 725 million square meters, surpassing

While these developments posed immediate challenges toChina's economic growth, they served to purge risky practices, a
crucial step towards fostering a sustainable property market. At
the height of the 2021 crisis, a significant portion of the nearly
1.5 billion square meters in residential property purchases werespeculative rather than driven by genuine demand.

078 惠達雜誌2021

2022

Housing Starts

2023

Housing Completions

Industry Focus >>slows. Although significant government subsidies over the past
decade facilitated the migration of millions of people to betterquality homes from older, less equipped ones, this demand isanticipated to dwindle. This decline is attributed to reduced
revenues from land sales, which constrain local government
budgets, along with a decrease in the number of residents
occupying older housing units.

A key obstacle to the establishment of a sustainable property
market lies in the timely completion of pre-sold properties,
often paid for in full in advance without a deposit or downpayment. Concerns over potential non-delivery of purchased units
can deter prospective buyers, thereby undermining property sales.
The preceding year marked a pivotal juncture in addressing
this challenge. Despite a halving in new construction starts, anda one-fifth decline in property investment compared to 2021,
notable progress was made. A significant factor contributing tothis trend is the increasing allocation of property investment
towards completing projects initiated in the past, rather thaninitiating new ones.
These developments represent predominantly positive news
for China's economy. Developers have significantly curtailed new
construction starts, acknowledging the end of the property boom,
and are channelling the bulk of their efforts and resources into
completing pre-sold housing units.

Anticipated Trends for 2024
In early 2024, China's housing market displayed signs ofstabilization, with a moderated decline observed in property
investment and sales. Governmental efforts to mitigate thesector's downturn, coupled with strategic interventions, contributed
to this tempered decline. Property investment fell by 9% year-onyear in the first two months of 2024, compared to a 24% decline in
December 2023. Similarly, property sales witnessed a 20.5% slidein January-February, reflecting a slight improvement from thepreceding months.
However, challenges persist, as evidenced by the sector's
struggle to stabilize home prices, which declined by 0.3% monthon-month in February. Despite the modest slowdown in investment
decline, analysts remain cautious, emphasizing the continued
downtrend in the real estate sector. The liquidity crisis facing
developers and the ongoing struggle for cash flow underscore theunderlying challenges confronting the industry.
In the coming years, China's housing market is expected to face
additional obstacles due to underlying changes in its population
dynamics. The need for more housing is likely to decrease as
population growth slows down and the pace of urbanization also

Efforts to strengthen spending on affordable housing and urban
redevelopment in the current year may partially alleviate thedecline in investment. However, these measures are unlikely toadequately address the substantial housing inventory overhang
held by financially distressed developers.
A smoother and more expedient transition for the real estate
sector can be achieved through market-driven adjustments inhome prices and swift restructuring of insolvent developers.
Phasing out regulations allowing banks to defer recognition of
bad loans to developers is crucial.
Authorities should extend support to viable developers whiletightening regulations to mitigate future risk accumulation.
Introducing insurance for homebuyers against the risk ofdevelopers' failure to complete purchased homes could enhance
confidence and alleviate sales pressures. Strengthening escrow
rules for presale financing would offer improved legal safeguards
for homebuyers. Implementing a nationwide property tax andenhancing pension or alternative saving schemes would reduce
households' reliance on housing investment. Fiscal reforms aimed
at bridging the structural gap between local government revenues
and expenditure obligations are essential to reduce dependence onland sales and property-related activities.
In reaction to challenges faced by the sector, China hasramped up efforts to breathe new life into the property market.
These efforts include cutting benchmark mortgage rates andimplementing a "whitelist" mechanism. This mechanism allows
city governments to recommend residential projects to banks
for financial support. Despite these measures, market sentimentremains muted, with trends such as home purchasing, financing,and construction initiations continuing to decline.

Conclusion
As China's housing market faces the challenges brought byeconomic changes, regulatory shifts, and technological progress,
the construction industry stands as a vital component, deeply
integrated into the fabric of development projects. Analyzing
the trends in new housing starts in 2023 and predictions for2024 sheds light on the interconnectedness between construction
endeavours and the broader economy. As stakeholders navigate
this evolving terrain, adaptability, innovation, and strategicplanning are essential for seizing emerging opportunities andtackling obstacles within China's dynamic construction sector.
惠達雜誌

Hardware & Fastener Components - no.62/2024

Sources:
China’s Housing Report by Peterson Institute for International Economics
China's Property Investment Report by Reuters
China’s Real Estate Sector Report by Internation Monetary Fund (IMF)

Given these changes in both short-term trends and long-term
factors, investment in housing is expected to decrease further,remaining low in the near future. Recent forecasts for real estate
investment in the medium term, taking into account different
scenarios based on changes in demand and supply-side
pressures, suggest a potential decline ranging from 30 percent
to 60 percent below the levels seen in 2022. This decline would
lead to a gradual recovery similar to what has been seen inother countries experiencing significant slowdowns in housing
construction.

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