The photo shows the construction site of a real estate project in Huai’an, Jiangsu Province, China, on October 9, 2025.
Photo | Future Publishing | Getty Images
BEIJING – China’s real estate market is expected to fall more sharply than expected in 2025, extending the industry’s downturn for the fifth straight year and delaying hopes for a market turnaround, S&P Global Ratings said in a report late Thursday.
Analysts expect sales of new homes to fall 8% from a year ago to 8.8 trillion to 9 trillion yuan ($1.23 trillion to $1.26 trillion).
This is a sharper decline than the 3% decline that major rating agencies had predicted in May. Edward Zhang, director of corporate ratings at S&P Global Ratings, told CNBC that analysts expected at the time that the trade war and other external uncertainties would have prompted China to deploy stronger support for its real estate sector.
The main reason for the weak outlook is that “homebuyer sentiment remains quite fragile,” Chan said. “Therefore, the government must continue to support this sector and demand.” [to] It helps restore homebuyer confidence. ”
In September 2024, the Chinese government called for efforts to “stop” the decline in real estate at a high-profile meeting. But after several new policies last year, political momentum for further support appeared to be slowing.
S&P noted that China’s five-year mortgage prime rate, the benchmark for most mortgages, has fallen by only 10 basis points so far this year, compared with a 60 basis point cut in 2024. This shows that despite the real estate recession, the Chinese government is not easing policy as aggressively as before.
In August, China’s three largest cities eased purchase restrictions to allow buyers to own multiple properties, but S&P noted that the measure primarily applied to properties in less desirable urban suburbs.
“First of all, if we can stabilize demand in top cities, especially first-tier cities.” [largest] “Prioritizing cities first will likely help create a more sustainable trajectory for demand recovery,” Chan said.
Improvement remains difficult to see
For now, hopes for China’s real estate recession to bottom out look even more distant.
According to S&P, sales this year are expected to be less than 9 trillion yuan, meaning China’s real estate market will halve from 18.2 trillion yuan in 2021 in just four years. The rating agency expects sales to decline further by 6% to 7% in 2026, and primary home prices to fall by 1.5% to 2.5%.
In the past few decades, Chinese homebuyers have tended to buy apartments before they are completed. However, construction was delayed as the developer ran into financial difficulties, shaking consumer confidence. In response, the Chinese government last year announced a “white list” of funding for approved but unfinished projects.
The inventory of completed but unsold homes rose to 762 million square meters in August from 753 million square meters in December 2024, according to S&P.
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“The government has done a lot to give people peace of mind.” [that getting] “Their apartments are not a problem right now. The problem is that the overall demand across the country seems to be weaker than we expected,” Chan said.
He expects the government to intervene in future, even if only gradually, if market weakness appears.
In August, some restrictions on home purchases were eased, and Chinese Premier Li Qiang attracted attention when he acknowledged that the real estate recession was still unresolved and expressed the need for further support.
Citing industry data, S&P announced that sales of China’s top 100 developers increased by 0.4% year-on-year in the next month.
As developers struggle to survive, “the market may ultimately shrink, but the sector may emerge healthier and more resilient,” the report said.
