NOMURA Securities’ Chief Economist for China, Lu Ting, recently stated that the Chinese real estate market is not a case of supply far exceeding demand, but rather a situation where demand exists while developers fail to complete and deliver properties on time to customers.
Lu Ting, as reported by Observer Net on February 22, expressed during a dialogue titled “Economist’s Advice on China’s Economy in 2025,” that the real estate market in China does not function as simple as paying for a property and receiving it immediately. This leads to a critical issue where it is not a matter of oversupply compared to demand, but a scenario where demand is present, clients have paid for their properties, yet the houses are not delivered as promised.
Further explaining, Lu Ting elaborated that many individuals mistakenly believe the real estate market operates similarly to other traditional markets, assuming that if supply exceeds demand, developers must be constructing many unsold properties. In reality, Lu Ting highlighted that the real estate market more closely resembles a future-oriented market due to the pre-sale system in place, with 90% of new homes being pre-sold in the previous housing boom, resulting in buyers paying upfront but not receiving their properties on time.
Lu Ting emphasized the truthful situation in the real estate sector: “The crucial issue now is not about developers building many unsold properties, but rather developers selling numerous properties that are still under construction.”
In May of last year, the People’s Bank of China announced the establishment of a 300 billion RMB special lending facility for affordable housing to assist developers in financial distress due to municipal authorities holding onto funds. However, Lu Ting expressed skepticism saying, “I predicted back then that it would be challenging for these funds to be utilized. Why? The central bank set high standards for municipal governments in terms of requiring completed properties, but the number of finished properties is relatively low. For local governments, it’s easier to manage if they can acquire fully built properties, which further limits the number of applicable properties.”
Netizen “Da Bing” commented on this, stating, “A great headline, echoing everyone’s concerns. So the question remains, how can we resolve the issue of selling incomplete properties?”
While “Chen Lao 3” believes, “Future-oriented properties need to exit the market, and existing properties are the way to go. After examining the local housing market recently, the vast majority of potential buyers prefer completed properties. Even if it’s just a few months away from being ready, they are hesitant, fearing unforeseen circumstances.”
The “Economist’s Advice on China’s Economy in 2025” series by Observer Net is a prominent dialogue program focusing on various Chinese economic issues, inviting renowned economists to share their perspectives on China’s economy in 2025.