China’s property market is facing a more challenging future than anticipated, despite government efforts to stimulate demand. The survey, conducted between February 12-24, revealed that analysts are now predicting a faster decline in home prices this year than previously expected, with a slower recovery forecast for 2026.
The poll, which surveyed 10 analysts, showed that property prices are likely to drop by 2.5% this year, surpassing the 2.0% decline predicted in November. While a 1.2% increase in home prices is anticipated for 2024, this is also lower than the earlier projection of 1.6%. Analysts project a modest 2.0% rise in prices by 2027.
A major concern highlighted by the analysts is the prolonged stabilization of the property market, largely due to high housing inventory, weak demand, and a long-term population decline. At its peak in 2021, the property sector accounted for about a quarter of China’s GDP, but its recovery remains fragile.
The poll also indicated a significant slowdown in property sales, with a 5.7% contraction expected this year, worse than the 5.0% decline forecast in November. Investment in the sector is also anticipated to fall by 7.0%, a slight improvement from the 8.0% drop previously predicted.
The Chinese government has implemented several “historic” measures to stabilize the sector, including urging local governments to purchase unsold homes from heavily indebted developers. However, these efforts have had limited success, prompting calls for more aggressive solutions, such as large-scale direct state purchases of unsold apartments.
Tyran Kam, senior director of Asia-Pacific corporate ratings at Fitch Ratings, stated, “The sector continues to face structural challenges, including a large unsold housing inventory, employment uncertainty, and low housing affordability.”
Regional disparities in property price trends are also emerging. While major tier-one and some tier-two cities may experience only slight declines in house prices, lower-tier cities are expected to face a more extended period of price reductions.
The government has made efforts to restore confidence in the market by lowering thresholds for home purchases, such as reducing mortgage rates, down payment ratios, and tax rates. These measures, combined with stricter risk control for real estate companies, are intended to encourage more home buyers, according to Ma Hong, senior analyst at GDDCE Research Institution.
The property sector is awaiting China’s upcoming annual parliamentary meeting, where analysts expect the government to introduce significant policies aimed at stabilizing the housing market. These measures may include efforts to push forward urban village renovation, support fundamental housing demand, regulate land supply, and address the issue of unsold inventory, according to a UBS research note.
Related topic:
Markets Struggle Amid U.S.-China Tensions and Weak Economic Data
