By Peter Bergman (MoneyAmped.com)
China’s turbulent real estate sector is navigating through a critical turning point. Following years of price declines and shrinking demand, new policies and support from the Chinese government now aim to stabilize home prices. According to a recent Reuters poll, these interventions could begin showing real effects by 2026, with a possible rebound in property values after years of dips. Here’s a closer look at the latest housing trends, key government actions, and projections for this critical sector.
Recent Declines in Home Prices
Slower Declines Forecast for 2024
While home prices in China are still falling, the pace of the decline has started to ease. The Reuters poll of 13 analysts conducted between November 15 and 28 suggests home prices could fall by 6% in 2024—less than the 8.5% decline predicted in earlier surveys this year. October alone marked a significant drop, showing the steepest year-on-year reductions in property prices since 2015. However, sequential monthly declines are slowing, signaling early signs of stabilization.
Projections for 2025 and Beyond
Looking further ahead, experts forecast a much more moderate dip of 2% in 2025, followed by a 1.6% increase by 2026. This potential reversal highlights the optimism stemming from sweeping policy reforms and market adjustments.
National Policies Spark Hope for Recovery
To counteract the severe real-estate slump that dates back to 2021, China has rolled out a range of fiscal and regulatory measures to breathe life back into the property market. Policymakers have recognized the sector’s importance, as it accounted for roughly 25% of China’s economic activity at its peak.
Key Reforms Introduced
Recent changes include a significant cut in the minimum down payment rate to just 15% across all property categories and relaxed home purchase restrictions. These adjustments, introduced in late September, aim to stimulate both first-time buyers and repeat purchasers.
Additionally, by November, the Ministry of Finance doubled down with tax incentives aimed at widening the buyer pool. Despite these efforts, a broader crisis in consumer and investor confidence has proven to be a persistent obstacle.
Industry Experts Weigh in
According to Gao Yuhong, a manager at CSCI Pengyuan Credit Rating, “The decline in home prices in the current real estate cycle is mainly influenced by supply and demand and home purchase expectations.” Gao also noted that first-tier cities like Beijing and Shanghai may stabilize earlier than smaller regions, possibly by late 2025.
The Role of Housing Sales and Investments
Declining Property Sales Narrow Losses
A glimpse of hope emerged in October, with housing sales showing signs of significant recovery. Analysts from Fitch Bohua noted that the combined effect of monetary easing and fiscal perks has sparked short-term increases in buyer interest. However, sales volumes are still expected to contract by 5% in 2025, according to the recent poll. This is an improvement from the 10% slump estimated in previous surveys from earlier in the year.
Investments Need a Boost
Real estate investment, another critical driver, is expected to shrink by 8% in 2025, marking a slight contraction but aligning with the gradually improving outlook. Experts have pointed out that innovative measures, such as using special bonds to purchase land or existing housing, will be vital for reducing unsold inventories and sustaining developer activity.
Long-Term Outlook for China’s Real Estate Sector
Challenges in Reviving Confidence
Despite promising indicators, the Chinese housing market faces long-term obstacles, particularly in rebuilding consumer confidence. Prospective buyers remain wary, worried about the stability of jobs and income amid a weakened economic landscape. A strong recovery will rely not only on policies but also on broader economic growth to restore optimism.
Potential Upside by 2026
However, stabilizing and even increasing property prices are within reach, according to analysts. Improved sales rates in larger metropolitan areas and consistent government policy could start driving annual market-wide gains. The projected 1.6% rise in 2026 would signify the sector returning to positive territory, hinting at room for a broader recovery.
Eye on Tier-One Cities
China’s top-tier cities are expected to lead this stabilization effort earlier than their smaller counterparts. With stronger demand and faster adaptation to policy measures, these urban hubs could shift market sentiment, laying the foundation for national recovery.
Bigger Implications of a Stabilizing Housing Market
Economic Ripple Effects
A healthier real estate market in China is essential for stabilizing broader economic activity. Since it contributes significantly to local government finances and impacts affiliated industries like construction and manufacturing, its recovery would ripple positively across the entire economy.
Global Relevance
Looking outward, international markets are also paying attention. China’s housing sector trends often set the tone for global commodity markets, particularly for resources like steel and cement. Any sustained price increases could reignite demand in these sectors, with implications that stretch beyond China’s borders.
What Investors Should Watch
For investors monitoring this sector, key developments include updates on policymaking, buyer activity trends in first-tier cities, and quarterly sales performances. Researchers caution that while the outlook is improving, the transition to growth will be gradual and uneven, requiring patience and keen observation of market dynamics.
Final Word
China’s housing market is at a pivotal juncture, with signs of stabilization appearing on the horizon. While the pace of recovery remains uneven, government efforts and market adjustments are setting the stage for a more balanced real estate sector by 2026. Long-term success will hinge on sustained policy support, economic growth, and a gradual return of buyer confidence. For now, cautious optimism prevails as China works to restore balance in its critical property market.
