Early signs of a turnaround are emerging in China’s property market, with the pre-owned homes sector showing particular promise. Data for the first two months of 2024 paints a picture of a market cautiously regaining its footing, fueled by a combination of government stimulus measures and a rise in available listings.

Year-on-year sales of pre-owned homes in 25 major cities jumped by nearly 25% in January and February, according to the China Index Academy. While this represents a 13.1% decline compared to 2023 – likely due to a high base from pent-up demand following the lifting of Covid lockdowns – analysts see it as a positive precursor for a more significant recovery later in the year.

“The pre-owned market is showing good activity, as evidenced by the increasing number of listings,” observes Yan Yuejin, director of the E-house China Research and Development Institute. “This gives buyers more options and bargaining power, potentially driving prices down and making pre-owned homes a more attractive proposition.”

Indeed, official data shows listings in 14 major cities rose by a staggering 56.9% year-on-year in February, marking an 18th consecutive monthly rise. This momentum appears particularly strong in higher-tier cities like Beijing, where listings climbed 8% month-on-month by the end of March. Similarly, Shenzhen’s tech hub saw a significant 116.6% increase in contracted sales during the same period.

However, potential buyers like Lindsay Zhang, a Beijing resident, remain cautious. While she’s identified a suitable second-hand apartment, she’s hesitant to pull the trigger, hoping for further price reductions. “The recent stimulus measures haven’t significantly impacted demand here,” she explains, “and I believe prices might drop by 15-20% before I make a move.”

This cautious optimism reflects the ongoing policy adjustments by local governments. In the first quarter of 2024 alone, over 100 measures were implemented nationwide to ease home-purchase restrictions, according to the China Index Academy. These include scrapping curbs on property purchases by divorced individuals in Beijing and eliminating eligibility criteria in Hangzhou, a move that boosted the city’s contracted sales by a staggering 236% month-on-month in March.

The central bank has also joined the effort, slashing the key mortgage benchmark interest rate by 25 basis points in February – the biggest cut since the system’s revamp in 2019. PBOC governor Pan Gongsheng acknowledged “positive signals” emerging in the sector, although he highlighted the continued presence of purchase restrictions in some pre-owned home markets.

Analysts like E-house’s Yan believe the complete removal of such curbs, as seen in Hangzhou, could be key to a broader market revival. A revitalized pre-owned market can act as a catalyst, allowing homeowners to sell their existing properties and upgrade to new ones, stimulating activity across the entire sector.

While the new homes market continues to struggle, with sales falling for a tenth consecutive month in March, the pre-owned segment appears to be paving the way for a potential turnaround in China’s property sector. Increased listings, government stimulus measures, and cautious optimism among buyers are all contributing to a cautiously hopeful outlook for the remainder of 2024.