How does secondary listings data diverge among cities? 

We studied secondary listings data across 257 cities (covering 88% of China's population) and performed a case study on three city clusters. We think the current high levels of secondary listings are the unwinding of speculative demand over the past decade when property prices appreciated sharply. Our analysis reveals diverging trends among cities: 

  1. tier-1 and tier-2 cities appear healthier;
  2. lower-tier cities (especially satellite cities) have higher levels of secondary listings. This is due to 
    • sharp property price appreciation in tier-1 and -2 cities led demand to spill over to satellite cities
    • policy measures are less restrictive in lower-tier cities
    • shantytown redevelopment has resulted in a sharp rise in property prices, driving speculative demand.

Why study secondary listings now? 

There are a few reasons: 

  1. Record high levels: The number of secondary listings in 50 major cities has been steadily increasing since early this year and is now at a record high. We estimate the current number of secondary listings could be equivalent to 32 months of secondary transactions. 
  2. Homeowners' property price expectations have changed following the property price decline in 2022 and the central government's "Property not for Speculation" stance. 
  3. Concerns on property tax: In October 2021, China's State Council announced a plan to expand the property tax reform trials to more areas and said the plan would last for five years. 
  4. Household sector deleveraging. China new household loans for both medium and long term are declining, down from over Rmb500bn per month in 2021 to Rmb200bn per month currently on a 12-month rolling basis, and came in at negative Rmb116bn in April 2023. We think the negative loan growth suggests the household sector is repaying mortgages more than borrowing, ie, deleveraging.

Secondary transactions in China set to increase

We believe speculative demand over the past two decades caused a rising proportion of new home transactions, especially in satellite cities due to the spillover of speculative demand. Homebuyers were willing to buy those properties for speculation, while developers and local governments were willing to sell properties/land parcels. However, under the "Property not for speculation“ policy and amid weakening property prices since 2H21, these speculative purchases are beginning to unwind. As a result, we expect property demand to be skewed toward prime locations within cities. At the same time, due to the digestion of secondary listings, developers will likely reduce construction starts, leading to lower primary housing supply. Combining these demand and supply factors, we expect secondary transactions to increase as a proportion of total property transactions.

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