China’s Property Market Stabilizes, But Recovery Faces Major Challenges

China’s Property Market Stabilizes, But Recovery Faces Major Challenges

2025-02-20 @ 10:01

China’s Property Market Shows Signs of Stabilization, But Challenges Remain

Minimal Price Decline in January

China’s real estate market may finally be showing the first signs of stabilization. According to the latest data from the National Bureau of Statistics, new home prices across 70 major Chinese cities declined by only 0.07% in January. This marks the fifth consecutive month of easing declines, following a 0.08% dip in December.

While these price drops are still occurring, the declining rate has slowed, suggesting a potential shift in market momentum. Experts suggest that government intervention and policy adjustments are helping to cushion the downturn.

Year-on-Year Price Trends

From a year-on-year perspective, new home prices saw a broader decline of 5.0%, though this was slightly better than December’s 5.3% drop. The slower contraction indicates that while the property market is not out of the woods yet, it is moving closer to stabilization.

What This Means for Investors

The narrowing of year-on-year price declines suggests that confidence in the housing market is gradually improving.

Investors may start considering entry points as prices stabilize further.

Market sentiment remains cautious, with long-term recovery still in question.

Government Intervention and Market Sentiment

Policymakers have stepped in with various supportive measures to stabilize the housing sector, including:

**Lower mortgage rates** – Making property purchases more affordable.

**Reduced minimum down payments** – Encouraging first-time buyers and investors.

**Tax incentives for home transactions** – Easing the burden on buyers.

These initiatives have played a crucial role in slowing the decline in housing prices. According to Morningstar’s Jeff Zhang, there is increased interest from homebuyers in major cities, although existing home prices remain under pressure.

Experts Weigh In on Recovery

Market analysts maintain a cautious optimism. Citigroup analysts, for instance, have noted that despite lingering issues, the sector is exhibiting “early signs of stabilization.”

However, Moody’s Ratings warns that homebuyer sentiment will only see a significant shift if:

Income expectations become more positive.

Housing prices show continued stability or a gradual rise.

Inventory levels decrease through better supply management.

Regional Disparities in Housing Prices

While the broader market shows stabilization, price trends have varied across different regions.

Top Cities Experience Growth

In China’s tier-one cities, new home prices have actually risen:

**Beijing** – Prices increased by 0.09%, reaching an average of 45,621 yuan (US$6,265) per square meter.

**Shanghai** – Prices climbed by 0.57%, bringing the average to 57,127 yuan per square meter.

Broader Market Lags Behind

While tier-one cities perform relatively well, the secondary housing market continues to struggle. Home prices in tier-two and tier-three cities have seen significant year-on-year declines:

Tier-One Cities: -5.6%

Tier-Two Cities: -6.0%

Tier-Three Cities: -8.2%

The disparity between new and existing home prices highlights the ongoing demand imbalance. Despite government efforts, the inventory of unsold homes remains a considerable concern.

Inventory and Secondary Market Challenges

A key hurdle to full recovery is the persistently high property inventory. As of 2024, the total unsold new housing inventory stands at 390.88 million square meters, marking a 16.2% increase from the previous year.

These unsold properties put downward pressure on prices and indicate that China’s property market remains oversupplied. Without a notable pickup in demand, the recovery could take longer than some expect.

Long-Term Outlook for China’s Property Sector

While some stabilization is visible, analysts remain skeptical about a rapid turnaround. According to Nomura, the prolonged price declines and ongoing economic challenges suggest that China’s property sector has not reached the end of its downturn.