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As mainland Chinese cities eased their housing control measures in the second half of 2023, primary market residential sales figures in Greater Bay Area (GBA) cities recovered from August, with an increase 27% recorded from August to November.
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GBA’s total commercial real estate (CRE) investment volume recorded RMB 66.1 billion in 2023, the second highest level in the past five years, and accounting for nearly 30% of total large-scale CRE transactions. size (>100 million RMB) in 2023. Mainland China
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State-owned enterprises and other sources of capital from the continent were the main drivers of the GBA investment market in 2023, with the logistics sector remaining the most favored category and biomedical and senior housing gaining ground .
HONG KONG SAR – Media OutReach Newswire – January 18, 2024 –
Global real estate services firm Cushman & Wakefield today published its
Review of the Greater Bay Area Residential and Investment Market 2023 and Outlook 2024. Although the GBA’s residential and investment markets are yet to see a significant rebound following the full reopening of the Chinese border, confidence in the property market has stabilized in the second half of 2023 as the central and Chinese locals have gradually relaxed control measures on the residential market. At the same time, the CRE investment market (large-scale deals for >100 million RMB) has also seen mainland capital and state-owned enterprises more active in reviewing their strategies and looking for investment opportunities. investment. Looking ahead, 2024 will be a year of recovery. The improved transportation network and expectations of more favorable policies to be introduced to the market will provide further support to the GBA’s residential and investment markets.
GBA Residential Market
Buying sentiment in the GBA residential market remained cautious overall in 2023. However, since the central government announced plans to ease control measures in late August, some GBA cities have adjusted their purchasing policies. housing, in particular by “recognizing housing rather than loans”, by reducing deposits. easing purchasing restrictions and lowering mortgage interest rates, helping to release pent-up demand and boost potential buyers’ confidence in the residential market. As a result, following a decline in GBA primary residential sales since March 2023, the market reached its lowest level in August and gradually stabilized towards the end of 2023. The total transaction volume in November 2023 was up 27% from August (chart 1). , bringing the total annual transaction volume to approximately 378,000 units, a year-on-year decrease of 6.2% compared to 2022.
Alva To, vice president of Cushman & Wakefield, Greater China & Consulting Manager, Greater China, said: “Based on past experience, it usually takes some time for the market to digest and react to new policies. Therefore, although the volume of residential transactions is unlikely to rebound significantly in the short term, it is expected that barriers to entry of potential policies such as “recognizing housing over loans” will increase. , reducing down payment rates and easing purchasing restrictions are helping to restore purchasing demand from upgraders looking to change homes. With the increasing integration of the GBA, we expect more Hong Kong residents to consider purchasing real estate assets in GBA cities, and the current strengthening of the HKD against the RMB is also beneficial for Hong Kong buyers entering the market. With the GBA, the residential market will likely benefit from more convenient mobility, and the government’s urban and industrial redevelopment strategies will help restore stability to the residential market. We forecast that average monthly first-hand residential sales in 2024 will reach approximately 33,000 units, and total annual transaction volume is expected to increase by 5% to nearly 400,000 units. »
In terms of secondary market housing prices, which generally better reflect current underlying trends, Cushman & Wakefield’s Shenzhen Price Index for mid-to-high-end secondary market housing continued to rise. decline in 2023, and the price correction in the fourth quarter widened slightly, bringing the full-year decline to 5.3% year-on-year compared to 2022 (Chart 2). Throughout 2023, the GBA residential market was still in a consolidation phase, where potential buyers tended to adopt a wait-and-see attitude, as they generally expected the government to ease restrictions and implement more policies to stimulate the housing market, which would impact the real estate market. overall trading volume and price levels. However, the gradual easing of control measures at the end of the third quarter of 2023 is expected to help restore market confidence and increase transaction volume, allowing residential property prices to stabilize in the first half of 2024.
GBA CRE Investment Market
Despite the global high interest rate environment, the performance of the GBA CRE (large transactions > RMB 100 million) investment market was relatively stable in 2023, with the total annual investment volume reaching 66, 1 billion RMB, marking the second highest level in the market. last five years. The volume of investments in the GBA accounted for approximately 30% of the overall investment market in mainland China, representing a significant increase from 18% in 2018, when the GBA initiative was first introduced (Figure 3) , reflecting growing investor interest in GBA CRE properties. Regarding the number of transactions, thanks to the improvement in buyer confidence in the second half of last year, there were a total of 85 transactions in the GBA area in 2023, the highest in three years .
Charli Chan, Executive Director of Cushman & Wakefield and Head of the HK RPC Capital Markets Team, commented: “GBA CRE’s total investment volume in 2023 was close to that in 2019, accounting for 29.4% of the entire mainland China investment market. This amount exceeded our previous mid-year forecast, indicating that investors have become more active in pursuing investments. opportunities within the GBA initiative. With offshore RMB lending rates much higher than domestic rates, foreign institutional investors have often restructured their asset allocation in a high interest rate environment, thereby slowing their pace in the investment market. real estate funds are more willing to offer discounts to attract buyers when disposing of mainland Chinese assets. In contrast, the continent’s capital sources, including state-owned enterprises, end-buyers and private investors, are relatively active, seizing the opportunity to fish on the bottom. ”
GBA CRE investment by asset type
In terms of real estate type, traditional office and R&D-oriented office assets continued to attract investors’ attention, accounting for more than half of the total investment volume in 2023. In recent months , the investment appetite in commercial projects gradually increased, with cases of block transactions involving escrow operations where negotiated prices were more attractive than the pre-pandemic level.
Charlie Chan concluded: “Looking ahead to 2024, interest rates in mainland China are expected to remain at a low level, which will help support GBA’s investment and financing activities. Traditional real estate investments should focus on high-end logistics portfolios with value-add potential. At the same time, the total market value of C-REITs has now exceeded RMB 100 billion, with a growing number of underlying asset types, where industrial parks, rental housing and infrastructure projects related to consumption are also attracting the attention of investors. and financial institutions focusing on core assets with stable returns, local companies and state-owned enterprises are actively seeking opportunities to purchase core assets in first-tier cities. We believe investors will have more choices and opportunities in 2024, as more quality assets in the GBA are likely to offer price discounts.
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Photo captions
1 – Graph 1: GBA first-hand residential sales
2 – Graph 2: Price index of mid-to-high-end secondary housing in Shenzhen
3 – Graph 3: CRE investment operations in the GBA (2018-2023)
4 – Graph 4: Total volume of investment in CRE in the GBA by type of investor in 2023
5 – Alva To, Cushman & Wakefield Vice President, Greater China and Head of Advisory, Greater China (left), and Charli Chan, Cushman & Wakefield Executive Director and HK RPC Team Leader, Capital Markets ( to the right).
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