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17 March 2025

China's Property Market Continues Decline Amid Economic Challenges

Despite government efforts, home prices and sales remain sluggish, prompting concerns over future recovery.

China's real estate market is continuing to face significant challenges as new data reveals persistent declines in home prices, investment, and sales. According to the National Bureau of Statistics, new home prices dropped by 0.1% month-on-month as of February 2025, marking the resumption of falling prices after two months of stability. Year-on-year, the figures are even more alarming, exhibiting a 4.8% decrease compared to January's 5.0% drop.

The overall downturn has created heavy concern among both policymakers and potential homebuyers. While the government's commitment to stabilize the property market remains solid—illustrated by promises to implement city-specific policies aimed at easing home-buying restrictions—it is unclear if these measures will yield satisfactory results. "We expect prices will find a trough in 2025, though an L-shaped recovery is more likely than U- or V-shaped recovery," said Lynn Song, chief economist for Greater China at ING.

Adding to the troubling news on new home prices, the index for home prices fell across 45 of 70 major cities last month, indicating over 64% of large metropolitan areas are struggling. The market observed declines also reported by NHK WORLD, highlighting major cities like Guangzhou, which saw home prices drop by 0.2%. Conversely, both Shenzhen and Shanghai experienced slight increases of 0.4% and 0.2%, respectively. Meanwhile, prices remained unchanged in cities such as Beijing.

Despite the government's engaging strategies aimed at invigorally propping up the housing sector, many experts argue they are yet to generate any tangible effect. The broader economy continues to display signs of sluggishness, contributing to lowering consumer confidence. Investment and sales for the January-February period fell dramatically by 9.8% and 5.1% year-on-year, respectively. Perhaps the most shocking statistic came from construction starts, which plummeted by 29.6%, following the previous year's drop of 23%.

Chinese property analysts maintain the potential for recovery hinges critically on economic stability, with many emphasizing the current economic environment requires potential buyers to feel secure with their job stability and future income prospects.

Observers are concerned about other underlying issues contributing to the slump, such as demographic shifts leading to fewer potential homebuyers and the general economic atmosphere acknowledging stagnant income growth. This turns up the heat as developers are left with considerable inventories of unsold homes, which only serves to exacerbate the situation.

The historical background of these pressing issues can be traced back to 2021 when the regulatory hammer cracked down on developer debt, leading to widespread liquidity crises and numerous unfinished projects, which have since turned homebuyers cold. Once accounting for nearly 25% of the nation's GDP, the property sector has faced compounded pressure not only from internal market factors but also external sources like U.S. trade tariffs.

Centaline property analyst Zhang Dawei expressed deep-seated concerns, stating recovery depends on comprehensive economic stability. "Purchasing homes now ties closely to job security and long-term income expectations."

So, what's next for the beleaguered sector? Analysts believe it may take considerable time for the market to stabilize, as the process will likely be uneven. Demand for housing remains lower due to the unresolved issues of oversupply and declining affordability. Buying power continues to wane as household incomes struggle to keep pace with inflation.

Policymakers continue to grapple with the task of fine-tuning their strategies, as homes remain unsold and construction is at its lowest. Many are keeping watch for the introduction of aggressive fiscal spending and monetary easing measures, but whether these will bring about the intended revitalization remains uncertain. The government urgently seeks strategies to stimulate demand for new homes, but obstacles remain steep.

Overall, the pronounced downturn within China's housing market presents both serious challenges and unanswered questions as analysts ponder the unspecified timeframe left to right this ship. With the parameters shifting almost daily, stakeholders remain on high alert.

With new home prices falling across major urban regions yet city-specific policies potentially on the horizon, the anticipated response from the property market remains tense. Buying habits are complex and nuanced, deeply intertwined with the overall economic climate. Only time will tell if homeowner sentiment can be restored and the market can stabilize after what has already been two years of uncertainty.