China’s Property Market Slump May End as Prices Stabilize, Says S&P Global Ratings
- S&P Global Ratings forecasts China’s property market slump might conclude by late 2028.
- Government policies aimed at stabilizing the sector and reducing unsold housing stocks are pivotal.
- Recent data indicates a potential recovery in home prices in major cities like Beijing and Shanghai.
BEIJING — Analysts from S&P Global Ratings reported on Thursday that the long-lasting slump in China’s property market may soon conclude, with residential real estate prices potentially reaching a low point by the third quarter of 2028. The analysts also noted that prices in major cities such as Beijing and Shanghai are expected to recover as early as next year.
This outlook represents a significant change from February, when S&P indicated that high levels of unsold housing were keeping a market recovery “out of reach.” Two pivotal government policies have since influenced this shift, according to Edward Chan, a credit analyst at S&P Global Ratings.
In August, the Chinese government implemented new restrictions on developers’ ability to sell unfinished properties. Subsequently, in September, Premier Li Qiang announced upcoming policies aimed at stabilizing the real estate sector, including a mortgage rate subsidy for first-time homebuyers purchasing properties valued at less than 1.5 million yuan (approximately $220,000) and under 120 square meters (1,291.67 square feet).
Chan emphasized that developers are now expected to exercise caution in land purchases, opting to acquire less land and undertake fewer new projects. This strategy could negatively impact revenue but is designed to alleviate the oversupply situation in China’s property market.
“Going forward in the next one to two years, the major factor in helping stabilize China’s home price is the continued reduction of supply,” Chan stated. Despite years of decline in the property sector, 2026 marks the first year of real estate inventory destocking, indicating a shift in market dynamics.
The oversupply issue remains significant; a 2023 estimate from Nomura noted that the volume of unfinished, pre-sold homes in China was roughly 20 times that of Country Garden, previously the largest non-state-owned developer in China by sales.
In the past, developers such as Evergrande have relied heavily on sales of incomplete apartments, resulting in a debt-fueled rapid growth cycle. Homebuyers in Tianjin have expressed their frustration to CNBC, stating they have been waiting years for their purchased units to be completed.
Comparison to Japan
S&P’s latest forecast also likened the depth of China’s current real estate downturn to historical housing crises in Japan, the United States, and Spain. The report suggested that China is addressing its market slump through two main strategies: supply reduction and corporate deleveraging. “China’s supply contraction is occurring much earlier and with greater magnitude than Japan’s housing crisis from 1991 to 2014,” the report noted.
Residential prices in China have already dropped by 22% since peaking in 2021. This decline is modest compared to Japan’s 67% drop following a more significant price surge, while the U.S. real estate downturn during the financial crisis saw a 26% decline.
China’s initiatives to subsidize mortgage rates and the influence of an artificial intelligence boom are also supporting a resurgence in property demand. Guotai Junan International’s Chief Economist, Hao Zhou, published a separate report indicating that the fourth quarter of this year may see the first growth in existing home prices in major cities since the downturn from 2021 to 2023. Zhou highlighted that tier-one cities were more likely to experience stable or rising prices starting in March, with a notable stabilization in Beijing’s prices, increasing by 1.4% from January lows.
Hangzhou, home to Alibaba, reported impressive new home sales figures, with prices only 14.2% below their peak. Zhou expressed optimism, stating, “The next three months are a key window,” and suggested that stability in major cities through the end of 2026 could indicate a potential bottoming out of the market.
Despite these promising indicators, it remains uncertain whether the demand will be sustainable in the long term. Stephen Cheung, a Morgan Stanley equity analyst, pointed out that the mortgage subsidy is likely to stimulate previously planned purchases rather than create significant new demand. He remarked on data from Bingshan showing a 50% increase in existing home sales across 25 cities during China’s recent public holiday compared to the previous year, an increase from 20% growth in September.
News Courtesy of CNBC
