China's Property Sector Outlook Dims despite Government Measures

The outlook for China's property sector has become more pessimistic, with expectations for a faster decline in home prices this year, despite hopes for price stabilisation by next year, according to a Reuters poll. Government efforts to boost demand have helped support a fragile recovery, but home prices are still anticipated to fall more sharply than previously expected. Growth is projected to resume in 2026, but at a slower pace than what was forecast in November.

Analysts predict that the stabilisation of China's property market will be a prolonged process, hindered by high housing inventory, continued weak demand, and a long-term population decline. At its peak in 2021, the property sector accounted for around a quarter of the country’s economy.

In a bid to stabilise the crisis-hit property market, China took "historic" measures last year, including urging local governments to purchase unsold homes from heavily indebted developers, aiming to alleviate some of the sector's strain.

Despite the government's key measures, such as urging local governments to purchase unsold homes, these steps had limited impact, forcing Beijing to seek new solutions for the ailing real estate sector. Analysts suggest that large-scale direct state purchases of empty apartments could be a necessary approach to address the ongoing crisis.

According to the latest poll, analysts project a 2.5% decline in home prices for 2025, a deeper drop than the previously estimated 2.0% decline. They foresee a modest 1.2% price increase in 2026, down from the earlier forecast of 1.6%, with a further 2.0% rise in 2027.

The survey revealed notable variations in home price fluctuations across different cities and regions. Tier-one cities and some major tier-two cities are expected to see a slight decline in home prices, with stabilization anticipated in 2026. In contrast, lower-tier cities could face a prolonged period of price declines, according to analysts at S&P Global (China) Ratings.

Property sales are projected to shrink by 5.7% this year, a steeper decline than the 5.0% drop predicted in the previous poll. Meanwhile, investment in the sector is expected to decrease by 7.0%, an improvement from the 8.0% drop forecast in November.

To boost market confidence, Ma Hong, senior analyst at GDDCE Research Institution, noted that lower thresholds for home purchases, including reduced mortgage rates, down payment ratios, and tax rates, along with stricter risk controls for real estate companies, would encourage more home buyers.

The market is also awaiting China’s annual parliamentary meeting, where key policies to support the real estate sector may be announced.