China’s housing market decline continues in January; sales and prices both fall

CHINA: China’s real estate sector remained weak at the start of the year, with new home sales and resale property prices continuing to drop, according to the China Index Academy.

A survey of the nation’s top 100 cities showed that the average price per square metre for existing homes declined by over 7% compared to Jan of last year. Meanwhile, Reuters reported that sales by the country’s 100 leading real estate developers slumped almost 17% year over year, reflecting the persistent downturn in the market.

The outlook

Although analysts predict property prices will continue falling, the pace of decline is expected to slow. A Reuters poll projected a 6.0% drop in home prices for 2024, improving from an earlier forecast of 8.5%. Oct recorded the steepest annual fall in new home prices since 2015, but monthly declines have begun narrowing.

Prices are projected to fall by 2.0% in 2025 before experiencing a 1.6% rebound in 2026. “The decline in home prices in the current real estate cycle is mainly influenced by supply and demand and home purchase expectations,” said Gao Yuhong, a CSCI Pengyuan Credit Rating manager. He also noted that major cities are expected to lead the recovery in the second half of next year.

Government efforts to stabilise the market

Since the property downturn began in 2021, China’s government has ramped up efforts to revive the sector, given its impact on local government finances and economic confidence.

To support the market, policymakers introduced new measures in late 2024, including subsidies for homebuyers, increased financing for state-owned enterprises, and relaxed mortgage requirements. In September 2024, the minimum down payment was reduced to 15% for all housing categories, and tax breaks were introduced in Nov to encourage purchases further.

Despite these interventions, consumer and investor confidence remains weak. “Since end-September, the combined effect of the policy cascade of monetary, fiscal, real estate and other measures has led to a significant recovery in housing sales in October, indicating a positive trend of stabilisation,” said Wang Xingping, a senior analyst at Fitch Bohua, as published by Reuters.

However, Wang cautioned that more efforts are necessary, stating: “The policy of ‘allowing to use special bonds to purchase land and existing housing’ is an important measure in reducing inventories and stabilising the property market, yet continuous efforts are still required.”

Further decline anticipated

A Reuters poll of 13 analysts from Nov 15 to 28 predicted that property sales would decline by 5.0% in 2025, an improvement from the previously projected 10.0% drop. However, real estate investment is expected to shrink by 8.0%, a slightly steeper decline than the 7.5% forecast in Aug.

Investors remain cautious due to weak returns and broader economic uncertainty, contributing to low demand from homebuyers. As a result, the housing market’s recovery will likely remain slow soon.