**Cover Story Data Analysis | Is Destocking and Reserves of Commercial Properties Feasible in the Real Estate Restart?** (AI Translation)

封面数读｜房地产重启“去库存”“收储”商品房可行吗？

Since the second half of 2021, China's real estate market has seen a significant downturn marked by defaults from numerous property developers. Continuous bailout efforts by local governments have only resulted in brief market rebounds. Data from the National Bureau of Statistics (NBS) revealed that, as of March, the total area of commercial housing awaiting sale reached a historic high of 748 million square meters [para. 1][para. 2]. This prompted a Central Political Bureau meeting on April 30 to propose measures to absorb existing housing inventory and optimize new housing supply [para. 3].

The latest central directive echoes past policy moves from eight years ago aimed at resolving real estate inventory issues, which led to a notable market resurgence driven by the monetization of shantytown redevelopment. Back then, the commercial real estate inventory peaked at 739 million square meters in February 2016 but declined to a near ten-year low of 492 million square meters by November 2019 following a series of loose policies [para. 4][para. 5]. Analysts from Guojin Securities foresee that the government might implement top-down measures with historic industry impact to address current imbalances [para. 6].

However, the current scenario is more complex, indicating a shift in strategy. Central authorities are focusing more on "coordinated research" before reducing housing stock, suggesting a need to optimize policies for new housing and establish a new real estate development model [para. 7]. The "Hundred Cities Residential Inventory Report" by E-House Research Institute stated that as of March 2024, the destocking cycle for new commercial residential properties in 100 cities was 25.3 months, significantly longer than the ideal 12 to 14 months [para. 8].

Industry insiders, including property developers, express caution about the current inventory reduction cycle due to differing market conditions from 2016, such as reduced market size and purchasing power [para. 9]. Real estate metrics, including sales, investment, and new construction starts, continued to decline year-over-year in the first quarter of 2024, with sales area and revenue of commercial housing falling by 19.4% and 27.6% respectively [para. 10][para. 11].

Distressed property firms face significant challenges with unsold inventory devaluing compared to land acquisition costs. The clearance rate for these housing stocks has been worryingly low, adding pressure on companies to manage idle assets worth billions [para. 12][para. 13]. One new policy trend is the “old-for-new” housing exchange, which has been adopted by nearly 40 cities, particularly focusing on sales intermediary collaborations and using local state-owned assets as ultimate buyers [para. 14].

The market has also seen recommendations for government "stockpiling," but there are critical challenges such as financial sustainability due to the high cost of commercial properties compared to essential goods. With a limited local government leveraging capacity, the idea of central government fiscal injection has gained traction [para. 15][para. 16]. UBS Chief China Economist Wang Tao suggests increasing low-cost funding support and enhancing loan support plans [para. 17][para. 18].

Low industry expectations surround the effectiveness of local revitalization policies. There is intensified anticipation for a national platform to manage property acquisition and storage, with policymakers considering a nationwide company to handle stalled construction projects and convert them into affordable housing [para. 19][para. 20]. The ongoing real estate inventory, estimated at 4.2 billion square meters, requires substantial funding, potentially between 9 trillion to 30 trillion yuan, if nationwide stockpiling is to be effective [para. 21][para. 22][para. 23][para. 24].

Experts emphasize the need to resolve China's real estate issues through the establishment of a nationwide platform while addressing various challenges, including funding sources and acquisition standards. The person familiar with policymaking remarked that while the era of real estate driving China's economy has ended, moving away from its economic influence will be a painful process under current policy conditions [para. 25][para. 26].