Residential buildings under construction at China Vanke Co.’s Isle Maison development in Hefei, China, on Nov. 27, 2023.
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China’s struggling real estate sector may not start turning around until the second half of next year — even with the latest stimulus measures, three research firms predicted this month.
After months of incremental measures, Chinese President Xi Jinping in late September led a top-level meeting that vowed to “halt the real estate market decline.” Earlier this month, the Finance Ministry introduced more measures aimed at stabilizing the real estate sector.
“We are finally at an inflection point of the ongoing downward spiral in the housing market on the back of a comprehensive and coordinated easing package,” Goldman Sachs analysts said in an Oct. 22 note titled “China real estate 2025 outlook: Bottoming in sight.”
“This time is different from the previous piecemeal easing measures,” the report said.
The analysts expect property prices in China to stabilize in late 2025, and rise by an average of 2% two years later. Property sales and new home construction are unlikely to stabilize until 2027, Goldman forecast.
S&P Global Ratings and Morgan Stanley this month also published reports forecasting China’s real estate market will bottom in the second half of 2025.
“If the government continues to prioritize support for developer financing and destocking, we believe property sales and prices could stabilize toward the second half of 2025,” Edward Chan, director at S&P Global Ratings, and his team said in an Oct. 17 note. They cautioned it would take time for policies to take effect.
Beijing has made clear that efforts to support the struggling real estate sector come second to its aim of bolstering advanced manufacturing as a new driver of growth. But it’s no easy feat, as property once accounted for more than a quarter of gross domestic product, with ties to both household wealth and local government finances. China’s indebted developers have increasingly struggled to deliver pre-sold homes, dampening consumer sentiment.
Analysts are closely watching a parliamentary meeting next week for any details on fiscal spending on reducing housing inventory.
Goldman’s prediction assumes an additional 8 trillion yuan ($1.12 trillion) in fiscal spending from the government, which has yet to be announced.
“Without such stimulus, the property market downturn could be prolonged by another three years,” the Goldman analysts cautioned. They said such support would need to address developers’ liquidity issues, reduce unsold housing inventories and ensure delivery of the pre-sold but unfinished homes.
Houses in China have typically been sold ahead of completion. That business model proved unsustainable after Beijing cracked down on developers’ high reliance on debt for growth, and homebuyer demand fell with slower economic growth.
Nomura estimated late last year that about 20 million pre-sold homes remained unfinished. Last month, officials indicated around 4 million homes had been completed and delivered to buyers under this year’s whitelist program, and pledged to speed up financial support.
Back in June, even before the latest stimulus announcements, Morgan Stanley had expected the inventory destocking to lead to a “rebound in property loan demand in late 2025 or 2026.”
The analysts expect about 30% of unsold inventory will never be sold, requiring banks or other unspecified entities to bear the cost.
China’s latest efforts to bolster confidence have given the real estate market a lift. Property sales in 22 major cities have fallen by around 4% on-year in October, a much smaller contraction than a plunge of more than 25% in September, according to China Index Academy, a real estate research firm.
Not a return to boom days
Property market stabilization, however, does not mean a full-scale recovery. Analysts project any rebound in home sales and new construction would remain subdued in the coming years.
S&P expects property sales in China to decline to around 9 trillion yuan or less this year, before dropping further to as low as 8 trillion yuan in 2025 — less than half the 18 trillion yuan sales level in 2021.
The analysts attribute the sales declines to the increase in unsold housing inventories, which continue to pressure developers resorting to price-cutting to attract buyers and reduce stock.
In September, property sales of China’s top 100 developers shrank 37.7% year on year, its steepest drop since April this year, S&P said, citing data from China Real Estate Information. It wasn’t a one-month plunge. Over the first nine months of the year, sales fell 36.6% from a year earlier, the data showed.
The deteriorating sales also take a further toll on developers’ liquidity, leading to a “lack of confidence” and developers seeking “a cautious approach” toward land acquisition and initiating new projects, according to S&P Global analysts.
The number of new construction projects had plummeted by 42% in 2023 from their peak in 2019, and declined a further 23% year on year in the first eight months of 2024, according to S&P Global’s analysis of official data from National Bureau of Statistics.
More to be done
Analysts remain cautious about the impact of China’s real estate stimulus.
“In our view, the scale of support has been insufficient and has faced execution challenges to stop the current downward spiral,” the Goldman analysts said, warning property prices could drop by another 20% to 25% if policy falls short.
In one of the few inventory-specific measures announced so far, the People’s Bank of China in May pledged 300 billion yuan for a relending loan facility for state-owned enterprises to buy up unsold completed homes, and convert them into affordable housing.
“Although helpful, it only accounted for a small percentage (4-6%) of the overall completed housing stock,” S&P said.
Morgan Stanley analysts said in their report Sunday that recent meetings with banks in Zhejiang, one of China’s better-off provinces, indicated they have not yet participated in the new government program to extend loans for buying housing inventory.