{"text":[[{"start":5.1,"text":"The writer is professor of finance at the Shanghai Advanced Institute of Finance and author of ‘China’s Guaranteed Bubble’"}],[{"start":12.8,"text":"The housing market in Shanghai and Shenzhen — two of China’s first-tier cities — finally began to show some signs of life this spring. More broadly, national property viewings and transaction volumes were both higher than last year and transaction volumes for “second-hand” homes (as opposed to new constructions) reached their highest level since the end of the pandemic. Within China, some experts are claiming that the country’s housing market must have bottomed out."}],[{"start":39.05,"text":"I beg to differ. "}],[{"start":40.5,"text":"First, there is strong seasonality in the Chinese housing market. Spring is always a time of strong activity. Following the surprise politburo meeting in September 2024, during which leaders pledged to revive economic growth, China’s housing market showed signs of strength heading into the spring of 2025, only to be followed by a sell-off in first-tier cities during the rest of the year."}],[{"start":64.75,"text":"Second, reaching the bottom in any major asset classes, such as stocks, bonds and commodities, does not take place in an instant. In housing, listing prices continue to fall, which is partly responsible for the increase in viewing and transactions. "}],[{"start":79.6,"text":"There is also the impact of stabilisation, improvement and the eventual reversal of investor psychology to consider. It is roughly estimated that 100tn renminbi ($15tn) of wealth has been wiped out by the correction in the Chinese housing market. We should not underestimate the scarring effect this has had on households and their expectations of real estate investment. The rise in the Chinese A-shares market will help to restore some investor confidence but its sustainability cannot be guaranteed. "}],[{"start":114.1,"text":"It is also notable that the increase in house viewing and transaction volumes both seem to be concentrated in older, more affordable and better rent-to-price-yield sectors. "}],[{"start":124.05,"text":"Following five years of house price decline, some properties are showing rent-to-price yields of 2 per cent in first-tier cities and even more in lower-tier cities such as Sanya and Taiyuan. These yields are attractive in a generally low interest rate environment when three-year savings accounts generate annual interest of about 1.5 per cent. "}],[{"start":144.3,"text":"However, it is worth noting that mortgage rates stand at about 3.5 per cent, suggesting rental income is nowhere close to covering mortgage payments alone. To make Chinese real estate attractive for investors, house prices must fall further, without a major pick-up in rent."}],[{"start":160.3,"text":"Around the world, housing markets are always segregated. Neighbouring cities and counties can have drastically different price patterns. Even within the same region, price positions can vary widely. The market in China may seem very encouraging based on pockets of first-tier city data but this cannot necessarily be extrapolated nationally. "}],[{"start":180.10000000000002,"text":"After all, most cities in China have suffered even longer and larger price drops during the latest round of real estate corrections. Many of these cities have been experiencing population decline as well, which will have a long-term negative impact on their housing markets. "}],[{"start":194.60000000000002,"text":"Last but certainly not least, young people, especially college graduates and newly-weds, have been the bulk buyers of Chinese new homes in the past decades. Now, young people are showing very different attitudes towards housing (and probably everything else). Young Chinese no longer view owning an apartment as the best investment opportunity in life or even a necessity. Instead, they spend more on experiences, given house prices are still out of their reach. "}],[{"start":222.40000000000003,"text":"It is hard to imagine that China’s housing market will keep following the same old playbook when the youngest generation of potential homebuyers no longer adheres to the rules."}],[{"start":239.35000000000002,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780376975_9435.mp3"}