China’s Real Estate Market: A Long Road to Recovery
China’s struggling real estate sector is expected to take a long time to recover, despite recent stimulus measures. According to research firms, the market may not start turning around until the second half of next year.
A Comprehensive Easing Package
In late September, Chinese President Xi Jinping led a top-level meeting that vowed to “halt the real estate market decline.” The Finance Ministry introduced more measures aimed at stabilizing the real estate sector earlier this month. Goldman Sachs analysts believe that these measures will finally bring an end to the ongoing downward spiral in the housing market.
Stabilization in Sight
Property prices in China are expected to stabilize in late 2025, and rise by an average of 2% two years later. However, property sales and new home construction are unlikely to stabilize until 2027. S&P Global Ratings and Morgan Stanley also forecast that China’s real estate market will bottom in the second half of 2025.
Challenges Ahead
Beijing has made it clear that efforts to support the struggling real estate sector come second to its aim of bolstering advanced manufacturing as a new driver of growth. However, property once accounted for more than a quarter of gross domestic product, with ties to both household wealth and local government finances. China’s indebted developers have increasingly struggled to deliver pre-sold homes, dampening consumer sentiment.
Fiscal Spending
Analysts are closely watching a parliamentary meeting next week for any details on fiscal spending on reducing housing inventory. Goldman’s prediction assumes an additional 8 trillion yuan ($1.12 trillion) in fiscal spending from the government, which has yet to be announced.
Inventory Destocking
Nomura estimated late last year that about 20 million pre-sold homes remained unfinished. Last month, officials indicated around 4 million homes had been completed and delivered to buyers under this year’s whitelist program, and pledged to speed up financial support. Morgan Stanley expects about 30% of unsold inventory will never be sold, requiring banks or other unspecified entities to bear the cost.
A Lift in the Market
China’s latest efforts to bolster confidence have given the real estate market a lift. Property sales in 22 major cities have fallen by around 4% on-year in October, a much smaller contraction than a plunge of more than 25% in September.
Subdued Rebound
However, analysts project any rebound in home sales and new construction would remain subdued in the coming years. S&P expects property sales in China to decline to around 9 trillion yuan or less this year, before dropping further to as low as 8 trillion yuan in 2025 — less than half the 18 trillion yuan sales level in 2021.
Conclusion
China’s real estate market is expected to take a long time to recover, despite recent stimulus measures. While there are signs of stabilization, challenges ahead include inventory destocking, fiscal spending, and a subdued rebound. Analysts remain cautious about the impact of China’s real estate stimulus, warning that policy falls short, property prices could drop by another 20% to 25%.
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