Goldman Sachs warns of deep, long-term slump in China�s housing market

#International News#China

Last Updated : 1st Jan, 1970

Synopsis

Goldman Sachs has forecast a long-term decline in China�s property market, with annual new home demand expected to fall below 5 million units�far from the 2017 peak of 20 million. The downturn, deepened by stalled projects and heavily indebted developers, has eroded buyer confidence since 2021. Official data shows home prices continued to slide in May, despite repeated policy interventions. Goldman also notes a sharp drop in demand from demolition-driven construction and a potential rise in investment-related home sell-offs. With household wealth tied to real estate dropping from 80% to 70% by 2025 and 80 million flats lying vacant, China�s property crisis is reshaping both consumer sentiment and economic fundamentals.

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Investment bank Goldman Sachs has recently projected a significant, prolonged downturn for China's property market. The forecast suggests that demand for new homes will remain drastically reduced across the world's second-biggest economy for an extended period, staying well below its past peak levels.

The bank's analysis indicates that demand for new homes is likely to fall below 5 million units per year, a stark contrast to the 2017 peak when it reached 20 million units annually. China's property sector, which once contributed roughly a quarter of the nation's economic activity, entered a prolonged slump in 2021. Market confidence has been severely impacted by the ongoing struggles of debt-laden developers who are unable to deliver pre-sold homes.

Official data also shows new home prices continued to decline in May, extending a stagnation period that has now lasted two years, despite several rounds of economic policy support measures. Goldman Sachs noted that their earlier calculations did not fully consider the possibility of investment demand turning negative, as many owners might sell vacant apartments. They also highlighted a shift in government focus towards urban renewal and rehabilitation rather than large-scale demolitions.

This policy change means that the demand for homes typically created by demolition activities, which averaged 4.7 million units in the 2010s, is now projected to drop to 2.7 million units annually in the 2020s. The property crisis has widespread implications for China's economy; household wealth linked to real estate reportedly dropped from 80% in 2021 to 70% by 2025.

Reports also indicate that as many as 80 million flats stood empty in 2024, and over two-thirds of China's 50 largest property developers by offshore debt had defaulted by Autumn 2023, illustrating a profound change in how consumers and investors view property.

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5th Jun, 2025

Goldman Sachs warns of deep, long-term slump in China�s housing market

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