State-owned enterprises, end-users, and mainland capital drive activity

• As mainland China cities relaxed their housing control measures in 2H 2023, primary market residential sales numbers in Greater Bay Area (GBA) cities picked up from August, with a rise of 27% recorded from August to November
• Total GBA commercial real estate (CRE) investment volume recorded RMB66.1 billion in 2023, the second-highest level in the last five years, and accounting for almost 30% of the total large-sized CRE deals (>RMB 100 million) in mainland China
• State-owned enterprises and other mainland capital sources were the key drivers in the GBA investment market in 2023, with the logistics sector remaining the most preferred category and biomedical and senior housing gaining traction

HONG KONG SAR - Media OutReach Newswire - 18 January 2024 - Global real estate services firm Cushman & Wakefield today published its Greater Bay Area Residential and Investment Market 2023 Review and 2024 Outlook. Although the GBA's residential and investment markets were yet to see a significant rebound following China's full border reopening, housing market sentiment stabilized in 2H 2023 as China's central and local governments gradually relaxed residential market control measures. Meanwhile, the CRE investment market (large-sized deals at >RMB 100 million) also saw mainland capital and state-owned enterprises more active in reviewing their strategies and seeking investment opportunities. Looking ahead, 2024 will be a year of recovery. The improving transportation network, and expectations of more favorable policies to be introduced to the market, will bring further support to the GBA residential and investment markets. GBA Residential Market Buying sentiment in the GBA residential market remained generally cautious in 2023. However, since the central government announced plans to ease controlling measures in late August, some GBA cities have adjusted their housing policies, including "recognizing homes rather than loans," reducing down payment ratios, relaxing purchase restrictions, and lowering mortgage interest rates, in turn helping to release pent-up demand and enhance potential buyers' confidence in the residential market. As a result, following a decline in GBA primary residential sales since March 2023, the market bottomed out in August and gradually stabilized towards the end of the full year 2023. Total transaction volume in November 2023 was up 27% from August (Chart 1), bringing the total annual transaction volume to around 378,000 units, a 6.2% y-o-y drop from 2022. Alva To, Cushman & Wakefield's Vice President, Greater China & Head of Consulting, Greater China, said, "According to past experience, it usually takes some time for the market to digest and react to new policies. Therefore, although the residential transaction volume will not likely rebound significantly in the short term, it is expected that the entry barriers of potential buyers can be eased under the relaxation of regulatory measures. Policies such as 'recognizing homes rather than loans,' lowering down payment ratios, and relaxing purchase restrictions are helping to restore purchase demand from upgraders looking to change their homes. Looking ahead to 2024, with the deepening integration of the GBA, we expect more Hong Kong residents will consider buying housing assets in GBA cities, and the current strengthening of the HKD against the RMB is also beneficial to Hong Kong buyers entering the market. With the increasing transportation connectivity in the GBA, the residential market will likely benefit from more convenient mobility, and the government's urban redevelopment and industrial strategies will help restore stability in the residential market. We forecast that average monthly first-hand residential sales in 2024 will reach about 33,000 units, and the total annual transaction volume is expected to increase by 5% to nearly 400,000 units." Regarding secondary market home prices, which generally better reflect current underlying trends, Cushman & Wakefield's Shenzhen price index for mid-to-high-end secondary market housing continued to trend downwards in 2023, and the price correction in Q4 slightly expanded, bringing the full-year drop to 5.3% y-o-y 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 were generally expecting the government to ease restrictions and introduce more policies to stimulate the housing market, in turn impacting the overall transaction volume and price levels. However, the gradual relaxation of control measures at the end of Q3 2023 is likely to help restore market confidence and drive up transaction volume, supporting residential property prices to stabilize in 1H 2024. GBA CRE Investment Market Despite the global high interest rate environment, GBA CRE investment...