The outlook for China’s property sector remains bleak as recent analyses suggest home prices are set to decrease at accelerating rates, contrary to earlier predictions of stabilization by 2025. A recent Reuters poll conducted between February 12 and February 24 highlighted growing concerns among analysts about the future of the market amid enduring weak demand and structural challenges.
According to the poll, which surveyed ten analysts, home prices are likely to plunge by 2.5% this year, exceeding previous forecasts of 2.0% decline. Although growth is anticipated to resume over the next few years, expectations have tempered with predicted increases of only 1.2% next year—a significant downgrade from the earlier estimated rise of 1.6%—and just 2.0% by 2027.
At its peak, the property sector accounted for roughly 25% of China’s economy, making its current downturn especially alarming. Analysts pointed to high housing inventory levels and bearish demand as core reasons for the slow recovery. Some analysts, like Tyran Kam, senior director of Asia-Pacific corporate ratings at Fitch Ratings, indicated the sector is grappling with multiple structural difficulties including unsold housing stock, job market uncertainty, and low affordability for buyers.
The adverse outlook for the housing market is not entirely unexpected, as prior government efforts to stabilize the sector have fallen short. Measures introduced last year included encouraging local governments to buy up unsold homes from financially troubled developers, yet these interventions have not made the desired impact.
“The sector continues to face structural challenges, including a large unsold housing inventory, employment uncertainty and low housing affordability,” Kam noted. This sentiment is echoed by other analysts who stress the need for “large-scale direct state purchases of empty apartments” as a viable solution.
Property sales are also projected to shrink this year, anticipated to decline by 5.7%, which surpasses the 5.0% reduction forecasted in previous reports. Investment levels are expected to fall by about 7.0% compared to earlier forecasts of 8.0%.
Efforts to boost consumer confidence have prompted adjustments to home purchasing parameters. Policy shifts, such as reduced mortgage rates, lower down payments, and tax modifications, may restore some faith among potential buyers. Ma Hong, senior analyst at GDDCE Research Institution, noted how these risk controls for real estate companies could help rekindle interest.
Looking forward, the upcoming annual parliamentary meeting is anticipated to discuss significant policies aimed at invigorate the real estate sector. Analysts suggest these discussions are likely to focus on stabilizing the housing market as one of the primary policy objectives. Further expected directives include initiatives to promote urban village renovations and support both fundamental housing needs and the upgrading of existing properties.
UBS analysts summarized their expectations, stating, “The meeting would likely emphasise stabilising the housing market as a key policy task, with measures to control new land supply and facilitate more progress of home inventory destocking.” This policy direction reflects the acknowledgment of the housing market's precarious position.
Regional discrepancies are also notable, with varying projections across different city tiers. Major tier-one cities and certain top-tier locations may experience minor dips followed by stabilization. Conversely, lower-tier cities could undergo prolonged periods of price declines, according to the findings presented by S&P Global (China) Ratings.
Given these dynamics, the road to recovery seems lengthy. All indicators suggest the property market's stabilization is set to be gradual. While the intention of boosting home buying through policy changes is clear, whether these measures will have tangible effects remains to be seen.
For now, stakeholders, including potential homebuyers and investors, remain cautious as they assess the real estate climate, waiting for the government’s next moves as the Annual Meeting of the National People’s Congress looms.