Author: Ma Yifan

In 2022, the property market has experienced a deep adjustment nationwide, and various indicators such as industry investment, construction, and new construction have seen a deep correction, of which the transaction of new houses fell by 27% year-on-year.

However, in this context, there was a deep adjustment in land transactions throughout the year, with land acquisition area falling by 53% year-on-year, a large amount of land was backed by urban investment companies, and the overall operating rate was low. According to the monitoring of Clarion Real Estate Research Center, due to the slowdown in the pace of receiving sales of real estate residential projects in 2022 and the decrease in new launches, the narrow inventory of commercial housing nationwide has not increased but decreased, and more than <>% of the typical urban narrow inventory has declined year-on-year.

However, the decline in the transaction volume of the property market in some cities is too large, but the pullback of land transfer is insufficient, the overall inventory dematerialization situation of the property market is still grim, and the generalized inventory is still rising. According to data from the National Bureau of Statistics, the area for sale of commercial housing in China has exceeded 6 million square meters, and the existing area for sale is enough for more than 5 million people.

The reduction of new pushes has caused narrow inventories to fall instead of rising

Kerry reflects the inventory situation in various places according to the narrow and broad inventory data, of which the narrow inventory refers to the unsold construction area of the approved pre-sale commercial housing, and the statistical scope of the generalized inventory is wider, referring to the sum of the saleable housing volume and the construction volume of residential land, which includes the projects that have not started construction and the projects that have started construction without obtaining a sales certificate, and the geographical scope also includes the counties and cities under the jurisdiction of prefecture-level cities.

Generally speaking, narrow inventory is a short-term and medium-term indicator and an indicator that the real estate industry and authorities focus on, while the broad inventory is a long-term indicator reflecting the inventory in the property market.

Affected by the property market, artificially slowing down the issuance of sales permits can reduce the narrow inventory of the property market. From the perspective of land, the decline in land transaction volume and the large number of urban investment to support land acquisition have also led to an overall reduction in narrow inventory.

2022 is the second year of the implementation of centralized land supply, the investment of private housing enterprises has fallen to the bottom, urban investment has become a new force for land acquisition, nearly half of the centralized land supply plots have been taken by urban investment in various places, the urban investment land start rate is significantly lower than the average, the urban investment start rate in 2021 is only 38%, and the urban investment land start rate in 2022 is only 8%, and the low operating rate will inevitably lead to a decrease in new projects.

In terms of energy levels by city, according to Clarion data, the narrow inventory of first-tier cities with high property market popularity has risen against the trend, reaching nearly 2022.12 million square meters by the end of December 3807, but an increase of about 2022% compared with the beginning of 8, which is the only inventory scale in cities of various energy levels to rise.

The narrow inventory of second-tier cities once reached a high of about 2020 million square meters at the end of 2, but in 7 and 2021, there was a negative scale growth for two consecutive years, and it fell by 2022% year-on-year in 2022.

Due to the significant decline in property market confidence in third- and fourth-tier cities, narrow inventories have fallen rapidly, and narrow inventories will fall by as much as 2022.6% year-on-year in 5. Under the circumstances of unclear market trends and pressure on corporate funds, coupled with the impact of the decline in land transactions in the previous period, the scale of new housing projects receiving sales permits for third- and fourth-tier new housing projects in 2022 will decline significantly, and significantly exceed the decline rate of new housing transaction scale.

Long-term inventory pressure in the property market is still climbing

Due to the large number of new projects that have been acquired but not started and projects that have not been granted sales permits, the reduction of narrow inventory in 2022 is essentially a "false decline".

Clarion data shows that in 2022, the year-on-year increase in broad inventory will reach 6%, the broad inventory in eighty percent of cities will increase year-on-year, and Qingdao will increase by 36% year-on-year, and long-term inventory pressure is still rising.

In addition, due to the sluggish transaction volume of the property market, whether it is narrow inventory or broad inventory, its digestion cycle is rising, and has exceeded the 2014 high, as of the end of 2022, the average property market digestion cycle in third- and fourth-tier cities reached 23.7 months, an increase of 2014% over the 26 high.

The reporter checked the website of the National Bureau of Statistics and found that the latest data on the area for sale of commercial housing has increased significantly year-on-year, and has exceeded 6 million square meters.

According to data from the National Bureau of Statistics, as of the end of February this year, the area for sale of commercial housing reached 2 million square meters, an increase of 6.55% year-on-year. Among them, the residential area for sale was 14 million square meters, a year-on-year increase of 9.3%; The area of office buildings for sale was 27 million square meters, a year-on-year increase of 15%; Commercial business premises were 5 million square meters, a year-on-year increase of 4700.21%.

According to China's per capita housing construction area of 39.8 square meters, the existing commercial housing area for sale is enough for more than 1600 million people. It can be seen that the situation of destocking the national property market is still grim.

According to Clarion statistics, more than 10% of the country's real estate market narrow inventory digestion cycle of more than two years, only a very small number of cities can maintain the digestion cycle within <> months.

Typical cities with healthy digestion cycles are Shanghai and Hangzhou, which had digestion cycles of 2022.6 months and 9.6 months, respectively, by the end of 4, both down more than 2014% from their 60 highs. The annual transaction scale of commercial housing in these two cities has remained at a relatively high level of about 1000 million square meters, and the narrow inventory scale has been controlled at a low level, only 500 million square meters, making the narrow inventory digestion cycle index in a relatively safe range.

Cities with a generalized digestion cycle of less than 3 years are only Hefei, Hangzhou, Shanghai, Quanzhou, etc., of which Hangzhou's property market inventory generalized digestion cycle is currently maintained at an absolute low of about 2 years.

More than half of the cities with a long general digestion cycle, of which Chongqing reached 9.8 years, mainly due to a sharp decline in Chongqing's commercial residential transactions in 2022, far lower than the transaction scale of 2000 million square meters in previous years, coupled with insufficient land supply pullback, resulting in a huge increase in Chongqing's broad digestion cycle.

One third of completed homes were not sold

According to data from the National Bureau of Statistics, by the end of 2022, the unsold area of residential completed housing nationwide had reached 2 million square meters, an increase of 7% year-on-year, hitting a new high in nearly five years.

However, in terms of historical data, the current unsold area of residential completed housing in the country is still far below the high of 2015 million square meters in 4. Since 5, the property market has entered a de-inventory cycle, and the use of a series of means such as shed reform has once caused the completed unsold area to decline year by year, reaching a low point in 2016. According to the CRRC, this indicator will rise sharply in 2019, mainly due to a significant decline in the sales rate of completed homes.

In layman's terms, houses become difficult to sell. How hard does it really sell? According to the area for sale of residential buildings, residential completed area, existing house sales area and other indicators, the unsold rate of completed residential buildings in China over the years can be measured. According to Clarion's calculations, the unsold rate of completed homes nationwide climbed to 2022% in 32 – that is, by the end of 2022, about <>% of the finished commercial homes had not been sold.

Due to the implementation of the pre-sale system of commercial housing in China, it generally takes 1-2 years of construction period from the sale of the house to the completion of the construction, and the real estate cycle has risen since 2016, and the unsold rate of residential housing has declined, reaching a low point in 2019-2021; Since 2020, the overall market dematerialization rate has begun to decline, until 2022, the national commercial residential sales scale decreased by 4 million square meters compared with the previous year, so the climb in the unsold rate of completed residential buildings is consistent with the downward cycle of the real estate market.

CRRC predicts that if consumer expectations and industry sales cannot be well corrected in 2023, the unsold rate of completed residential buildings will continue to rise in the next one or two years, resulting in an accelerated increase in the area for sale of commercial housing, and the backlog of real estate inventory will become more serious.