The Real Estate Market Is Changing: People Think Prices Will Rise, But Why Are They Still Selling Desperately?
Hello everyone, I'm your financial journalist. Today, we're discussing a recent report from Cheung Kong Graduate School of Business that reveals a very counterintuitive and even somewhat disheartening phenomenon: Investors are saying they're optimistic about the real estate market, but in reality, they're busy selling their properties.
It's like someone who sees the stock market rising and thinks prices will go up, but their actions betray their optimism by pressing the “sell” button. What's really going on? Is the market deceiving us, or has our investment logic completely changed? Let's break down this report in simple terms to understand the behind-the-scenes reasons.
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1. Expectations Are Improving, but Wallets Aren't Keeping Up: A Tug-of-War Between “Bullish” and “Bearish” Sentiments
First, we need to address a key contradiction: Being bullish doesn't mean buying.
According to the report, by the end of 2025, only 37% of people believed the real estate market would rise, indicating a relatively pessimistic outlook. However, by 2026 (note: the timeline in the original text may be a future projection or an error; we're interpreting it as the latest data), this proportion had risen to 56%. In other words, more than half of people thought housing prices would increase.
But! The number of people actually willing to spend money on buying homes hasn't increased accordingly.
- The numbers tell the story: The proportion of people willing to increase their real estate investment is still negative (about -16.7%). That means for every 100 people, there are more than 16 who want to sell houses than buy them.
- Both Retail Investors and Experts Agree: Whether they're ordinary consumers or professionals in the financial sector, everyone agrees that housing prices will rise, but no one wants to increase their holdings.
Why This Discrepancy?
It's similar to watching the price of cabbages stop falling and start to rise in the market. You might think the price will be even higher tomorrow, but you won't go buy 100 kilograms of cabbages to stock up at home because your fridge is full, or you prefer to deposit the money in the bank for interest. The current real estate market is in a state where emotional recovery outpaces practical action.
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2. “Taking Profit on the Rebound”: Smart Money Is Quietly Withdrawning
Why do people think prices will rise but still choose to sell? Professor Liu Jin from Cheung Kong Graduate School of Business pointed out a crucial reason: Investors are selling off their properties while the market is rebounding.
In the past, people bought houses with the hope of selling them at a higher price in the future. But now the logic has changed:
1. Seize the Opportunity: With improving market sentiment and relaxed policies, and increased trading volume, it's easier to sell houses, and you can get a better price.
2. Safety First: Although houses are still considered a good asset, their liquidity has decreased (they're harder to sell). Instead of holding onto them in anticipation of the next bull market, people prefer to convert them into cash.
3. Money Moving Around: Where is the money from selling houses going? The report shows that people are more inclined to move their money into deposits, financial products, the stock market, or other assets. This indicates that real estate is no longer the only “safe haven” or the preferred way to grow wealth.
In simpler terms: In the past, people were committed to their investments; now, they look to cash in when the opportunity arises. Even if you think prices will rise another 20%, if you can get 5% annual returns by investing the cash or take a chance in the stock market, many would choose the latter option. The cost of holding onto a house (interest, depreciation, opportunity cost) is too high.
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3. The Rules of the Game Have Completely Changed: From “Speculating on New Houses” to “Investing in Existing Properties”
Professor Liu Jin made a significant statement: The era of reacting to price increases is over.
What does this mean? For over a decade, the logic of the Chinese real estate market was: buy new houses, wait for demolition or appreciation, and then sell. This was an “incremental game” where as long as cities were expanding, the number of houses kept increasing, and people felt confident buying.
But this strategy no longer works:
- Fewer New Houses: Since 2020, the annual supply of new houses has been decreasing by 20%.
- More Used Houses: According to the National Bureau of Statistics, the area of used houses sold online (550 million square meters) has exceeded that of new houses for several months in a row. New house sales decreased by 12.1% year-on-year, while used house sales increased by 10.6%.
What Does This Mean?
The focus of the real estate market has shifted from developers selling new houses to homeowners selling used houses.
- In the Past: Buying a house meant investing in the “future” and buying into a promise.
- Now: Buying a house is about getting immediate value, such as a comfortable living experience and a good location.
The “financial” aspect of housing (for speculation) is weakening, while its “consumption” aspect (for living) is strengthening. People buy houses not because they think they will rise in value, but because of their comfort, location, and school district. This shift has left investors who bought solely for investment feeling lost and leading them to exit the market.
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4. The Return of Real Demand: Why “Rent First, Buy Later” Has Become the Norm?
The report also highlights an interesting trend: Real transaction demand is returning to basic needs.
In the past, many people bought houses for both investment and living purposes. Now, the investment motive has faded, leaving only the need for a place to live. But even with this need, people are more cautious.
- Changing Attitudes: Due to significant price drops in recent years, many are afraid of buying at the peak, so they choose to rent first. Renting offers flexibility; you can move out if you don’t want to stay. Buying a house is a long-term commitment.
- Market Evidence: This is reflected in the data: the rental-to-sale ratio is improving. Rent costs are rising, making renting more cost-effective. As a result, more people are choosing to rent.
- Chain Reaction: With more people renting, the liquidity of used houses has improved (because there are sellers and buyers, even if the number of buyers is low). This explains the increase in used house sales—it's not because everyone is buying houses frantically, but because the market is finding a new balance through price adjustments and rental alternatives.
A Lesson for Ordinary People: If you're not in a situation where you need to buy a house urgently, such as for marriage or children's education, consider renting for a few years. The rental market is slowly recovering, and the “safety” of renting may outweigh the “risks” of buying.
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5. What About the Future? The Sale of Existing Houses Is the Key to Stability
Finally, let's look ahead. Professor Liu Jin believes that the sale of existing houses will be crucial for stabilizing the new house market.
- Supply: Developers used to prefer selling off-plan houses to quickly recover funds, leading to rapid construction and excess inventory. If the sale of existing houses becomes the norm, developers will slow down construction, reducing the supply of new houses.
- Prices: With less supply and reduced inventory pressure, new house prices are expected to stabilize or adjust reasonably (not skyrocket).
In summary, the future of the real estate market looks like this:
1. Greater Differentiation: Housing prices in core cities (first- and second-tier areas) will stabilize first due to real demand and population growth.
2. Existing Houses Become the Focus: The used house market will play a more significant role, with liquidity being more important than new houses.
3. Reconstructed Investment Logic: Don't expect to make easy profits from buying houses as in the past. Houses will be more like durable consumer goods, with value based on their use, not speculation.
Advice for Investors:
- Don’t chase Rising Prices: Buying houses on a rebound is likely just taking over from previous buyers.
- Consider Liquidity: If you do want to buy, focus on properties that are easy to sell—those in core locations with good schools and quality facilities, not those that seem cheap but have no buyers.
- Be Patient: The bottom of the real estate market is not a single point but a range. The current bullish sentiment is just emotional recovery; a real buying signal may come when the rental-to-sale ratio becomes more reasonable or when there are more substantial policy improvements.
In one sentence: The real estate market isn't dead; it's just adapting to a new reality. Understanding this change will help you avoid getting lost in the next market fluctuations.