Over the past two years, the real estate sector and related industries have been in dire straits. Many homebuyers are feeling disheartened, widespread defaults have led to personal bankruptcies, and companies in categories such as home furnishings and furniture have suffered a string of collapses. Even regions like Foshan, known for their concentration of real estate supply-chain enterprises, are experiencing significant economic difficulties. Moreover, housing prices in medium and large cities continue to decline, making the situation extremely severe. In my view, it will take a fundamentally new strategic approach at the top level to break the current deadlock.
Objectively speaking, our understanding of the real estate sector is shaped more by global research experience than by immersion in the industry itself. Over the past decade, we have provided consulting services to technology companies in dozens of countries, gaining a certain familiarity with the real estate markets in the US, Europe, and Japan, and have compared these with China’s national conditions, including through our own investment and transactions. Intuitively, I tend to think that our judgments about real estate are overly inward-looking and empirical. Both public opinion and policy confidence are excessively pessimistic, and this pessimism has led to a widespread social consensus that “real estate must fall.”
Let me offer four brief examples to compare domestic and international situations. In terms of residential quality, many properties in the core of Paris sell for over RMB 200,000 per square meter, yet most are century-old landmark buildings that are inconvenient to live in and rarely occupied by their owners. Their value is preserved mainly due to scarcity and financial stability, attracting wealthy buyers from around the world—demonstrating that the financial attributes of real estate in certain areas should not be dismissed. In terms of price, even in the UK, where industry, finance, and innovation have all declined, there are still luxury homes near Hyde Park in London selling for RMB 500,000 per square meter. It’s hard to judge whether this price is reasonable, but it is set by the market. In Budapest, Hungary, better properties have risen to RMB 30,000–40,000 per square meter, even though its economic scale and growth potential are arguably lower than China’s top five provinces. This suggests that real estate development is not directly tied to economic fundamentals. Looking at Japan, the real estate market emerged from its trough in 2023, but the real price increases were limited to core areas of Tokyo and Osaka. These areas benefited mainly from nationwide population concentration and foreign buyers, bringing liquidity. The Japanese experience shows that if the real estate market truly collapses, recovery ultimately depends on supporting key areas and attracting foreign investment, rather than boosting local homebuying demand or relying on income growth.