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China's housing market continues to face downward pressure, with new home prices falling 0.3% month-on-month and 2.5% year-on-year in August. Resale prices in tier-one, tier-two, and tier-three cities also declined, while property investment dropped 12.9% year-on-year from January to August. Analysts say recovery may not occur until 2026 or 2027 due to weak buyer sentiment, high inventory, and employment pressures. Policymakers are easing home purchase restrictions and considering credit and interest rate adjustments. Premier Li Qiang has emphasized the need for stronger measures to stimulate housing demand and support market stability.
China's housing market has continued to experience declining prices, with new home prices falling again in August. Data from the National Bureau of Statistics shows that prices dropped 0.3% compared to the previous month, the same rate of decline as in July. Since May last year, new home prices have been on a downward trend. On a year-on-year basis, prices fell 2.5% in August, slightly better than the 2.8% drop recorded in July. Advertisement
The real estate sector in China has been slowing since 2021. Despite multiple government efforts, such as mortgage rate reductions and urban village renovation programmes, the market has not fully recovered. A spokesperson from the statistics bureau said the property sector is stabilizing but requires more support to strengthen demand.
Before the downturn, real estate contributed around a quarter of China's economic activity. Today, it continues to be a drag on growth. Policymakers are working to boost consumption and control price competition to achieve Beijing's growth target of approximately 5% this year, but challenges like deflationary pressures and U.S. tariffs remain.
Property analyst Zhang Dawei from Centaline noted that the market is under pressure and expects more measures to stabilize housing. He highlighted that easing purchase restrictions, looser credit policies, and a potential Loan Prime Rate cut later this month are being considered to stimulate demand.
Among 70 surveyed cities, 57 saw month-on-month price declines, and 65 reported annual drops. Resale prices also weakened significantly, with tier-one cities falling 3.5% year-on-year, tier-two cities down 5.2%, and tier-three cities declining 6.0%.
Property investment fell 12.9% year-on-year between January and August, while property sales by floor area dropped 4.7%. Mainland and Hong Kong property stocks saw losses in early trading, with the Hang Seng China Mainland Property Index down 2.3% and the CSI 300 Real Estate Index falling 0.7%. Iron ore futures also dropped due to the ongoing weakness in the property sector, even as steel and steelmaking inputs rose.
Analysts in a recent Reuters poll expect home prices to stabilize no earlier than the second half of 2026 or 2027, a delay compared to predictions three months ago. Weak income expectations, high unemployment, and large secondary-market inventories are keeping buyers cautious, particularly in smaller cities. Households affected by reduced wealth and uncertain business conditions are spending less, which is also impacting employment growth.
Recently, Shanghai and Shenzhen have eased homebuying restrictions further, removing them in certain districts for qualified buyers. The central government has continued to emphasize the need to stabilize the housing market. Premier Li Qiang urged stronger measures to consolidate the market's stabilizing trend and stimulate demand for housing upgrades.
Source- Reuters
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