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What Impact has Coronavirus had on the Real Estate Market in China?

The sector has been hit hard by the Covid-19 crisis, which has spread around the globe with a two-month time lag. Overseas investment in Chinese real estate fell by 77.2% during the first two months of the year and land transactions decreased by 36.2%.

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Photograph: Max Ostrozhinskiy / Visual. Concept and design: MIMA

Three months ago – the first cases supposedly date back to December – a coronavirus outbreak called SARS-CoV-2, and popularly known as Covid-19, was reported in the Chinese region of Wuhan. To date, in China alone, it has left more than 81,100 people infected, more than 3,200 dead and has started a health crisis – which is driving an economic and social crisis – that is rapidly spreading around the world. Its origin has caused many experts to set their sights on the Chinese market to try to predict what will happen next to the rest of the world’s economies.

What has happened to the Chinese economy?

The measures adopted by the Chinese authorities to reduce the number of infections have had a significant effect on the country’s economy. During the first two months of 2020, industrial output fell by 13.5% in inter-annual terms due to the general closure of factories, its largest decrease since records began at the beginning of 1990, according to China’s National Bureau of Statistics (NBS).

Manufacturing output also decreased by 15.7% and retail sales dropped by 20.5% in inter-annual terms. “The new coronavirus epidemic reduced economic activity during the first two months of the year. But, in general, the short-term consequences are manageable”, explained the NBS in a statement.

Real estate sector

The data shows that the real estate sector has also been affected by these measures. In January and February, when Covid-19 was at its peak in the Asian country, transactions and new project launches were curbed, with an average decrease of between 15% and 40%. In this way, property sales fell by 35.9% with respect to the same period a year earlier, whilst the surface area of assets sold decreased by 39.9%.

Source: China’s National Bureau of Statistics

But the most important impact was on investment and, specifically, foreign investment. During those two months, investment in real estate developments amounted to 1,011.5 billion yuan (around €132 billion), down by 16.3% compared to the same months in 2019, according to data from the Chinese government. In the case of investment in residential assets, the decrease as a result of coronavirus was 16%, whilst in the office segment, the reduction amounted to 17.8%. Investment in commercial premises saw the largest decrease, down by 25.6% YoY. And whilst transactions, in general, suffered a major reduction, the impact on operations by overseas investors was even greater. In this way, foreign investment by funds for companies in the property development segment fell by 77.2%, to 1,200 million yuan (around €156.7 million), according to the country’s National Bureau of Statistics.

The paralysis in terms of property development is reflected in the surface area of new build properties: down by 45%. Nevertheless, during the first two months of 2020, more than 530 million square metres were put up for sale, up by 1.4% compared to the previous year.

In January and February, the total surface area acquired by real estate companies in China amounted to 10.9 million square metres, down by 29.3% compared to the previous year, and the volume of land transactions reached 44 billion yuan (around €5.75 billion), which represents a decrease of 36.2% compared to 2019. In February, the national real estate index stood at 97.4. In general, the most appropriate level is 100, the moderate level is between 95 and 105, the lower level is less than 95 and the upper level is more than 105.  

Investment by asset type  
Figures in hundreds of millions of yuan and in %  
 Total volumeVariation
Real estate transactions8.203-35,9
Residential asset transactions7.198-34,7
Office transactions300-40,6
Commercial asset transactions517-40,6

The residential market: fewer projects and 35% fewer sales

Of the total investment in real estate in the Asian country, 731.8 billion yuan (€95.7 billion) corresponded to residential assets, which represented a 16% decrease compared to the first two months a year earlier. The surface area of new builds amounted to 75.6 million square metres, down by 44.4%; whilst the surface area of completed buildings in January and February amounted to 67.6 million square metres, down by 24.3%.

The residential land sold during this period also suffered from a decrease, of 39.2%, in line with the decline in the sales volume of residential assets, which saw a reduction of 34.7% during the worst months of the coronavirus in China.  

Offices, the hardest hit sector

Total investment in offices in China suffered an interannual decrease of 17.8%. The greatest impact was most evident in new office projects: 3 million square metres, down by 58% in inter-annual terms, the largest reduction of any asset type.

The purchase of these types of properties also experienced a significant decline: the surface area of offices acquired during the period amounted to 1.7 million square metres, which represented a decrease of 48.4%. By sales volume, the reduction amounted to 40.6%.

Investment in commercial premises, down by 46%

In China, 97.9 billion yuan (€12.8 billion) was invested in January and February in commercial premises, down by 25.6% compared to 2019. The surface area dedicated to new build commercial premises amounted to 8.7 million square metres, down by 50.7%; whilst the surface area of completed commercial assets in January and February amounted to 10.4 million square metres, a reduction of 29.8% YoY.

The commercial surface area sold during this period amounted to 4.5 million square metres, which represented a decline of 46% YoY. Meanwhile, the volume of commercial assets sold amounted to almost 51.7 billion yuan (€6.75 billion), also equivalent to a decrease of 46% YoY.

The central region, the most affected

Hubei province and its capital Wuhan, the city where the coronavirus outbreak started, form part of the central region of China. That has been where the economic ravages of the pandemic have been felt the hardest. During the first two months of this year, investment in real estate development reached 173.1 billion yuan (€22.6 billion), almost 26% less than a year earlier and the largest drop in investment by area.

In addition, acquisitions made during this period spanned a total surface area of 84.7 million square metres, of which 21.4 million square metres were registered in the central region. That figure represents a 45.2% decrease compared to the previous year and the largest reduction by region.

What do the experts think is going to happen?

Despite the fact that the majority of the country’s indices have been falling during this period, the experts agree that this is a temporary crisis and, therefore, its consequences will have a short-term impact. “The new coronavirus outbreak is an unexpected event that will have a material impact on the real estate market in the short-term”, explains Cathy Huang, Head of Research at JLL in East China.

“Investment transactions will take several months to close, and so the impact should be limited if the outbreak shrinks within 3-6 months. Transaction volumes may decrease slightly during the first half of 2020 as some investors decide to wait and see, which will delay transactions across the region. However, if the outbreak is short-lived, we expect the pent-up investment demand in China to be released during the second quarter or second half of the year”, explains JLL.

In terms of new home deliveries, the consultancy highlights, in its initial assessment of the impact of coronavirus on the Asian real estate market, that “it is likely that the launch of residential developments will be delayed across many markets, including mainland China and Hong Kong, since the feeling is one of overwhelming uncertainty”.

“During the SARS epidemic of 2003, the office market benefitted from a booming economy and resisted a decrease in rental prices for 3 quarters before growing again. Nevertheless, this time, we expect rental prices to fall and for it to take longer for them to stabilise”, says Huang in the aforementioned report.


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