China’s property slump this year looks worse than expected, S&P says

BEIJING — China’s actual property market is predicted to fall extra sharply than anticipated in 2025, extending an trade hunch for a fifth-straight yr and delaying hopes of a market turnaround, S&P World Scores mentioned in a report late Thursday.

The analysts mission gross sales of recent houses will drop by 8% from final yr to between 8.8 trillion yuan and 9 trillion yuan ($1.23 trillion to $1.26 trillion).

That is a far steeper decline than the three% drop the main scores company had predicted in Might. On the time, the analysts anticipated the commerce conflict and different exterior uncertainties would have pushed China to roll out stronger assist for the actual property sector, Edward Chan, director, company scores at S&P World Scores, informed CNBC.

The principle cause for the weaker outlook is that “homebuyers’ sentiment continues to be fairly fragile,” Chan mentioned. “So the federal government might want to proceed to assist the sector and demand [to] assist restore homebuyers’ confidence.”

In September 2024, Beijing referred to as for efforts to “halt” the actual property decline in a high-profile assembly. However after some new measures final yr, the political momentum to ramp up additional assist appeared to gradual.

S&P famous that China’s five-year mortgage prime fee — the benchmark for many mortgages — has solely fallen by 10 foundation factors thus far this yr, in contrast with a 60-basis level discount in 2024. This indicators that Beijing is not easing coverage as aggressively as earlier than, regardless of the property hunch.

In August, three of China’s largest cities eased buy restrictions to permit consumers to carry a number of properties, however the transfer principally utilized to models within the much less fascinating metropolis outskirts, S&P famous.

“If demand could be stabilized first within the higher-tier cities, notably within the first-tier [largest] cities first, that will in all probability assist the trajectory of the demand restoration to be extra sustainable,” Chan mentioned.

For now, hopes of a backside in China’s actual property hunch look much more distant.

With gross sales projected to be 9 trillion yuan or much less this yr, China’s property market may have halved in simply 4 years, from 18.2 trillion yuan in 2021, in response to S&P. The scores company expects gross sales to fall by one other 6% to 7% in 2026, with major residence costs down by 1.5% to 2.5%.

In previous many years, homebuyers in China have tended to purchase flats forward of completion. However as builders bumped into monetary difficulties, building was delayed, shaking client confidence. This prompted Beijing final yr to announce a “whitelist” to fund accepted unfinished tasks.

As of August, accomplished, however unsold housing stock had climbed to 762 million sq. meters, up from 753 million sq. meters in December 2024, S&P mentioned.

“The federal government has been doing quite a bit to guarantee folks [that getting] their flats is not the problem now,” Chan mentioned. “The difficulty is the general demand for the nation as an entire appears to be weaker than we anticipated.”

Going ahead, he expects the federal government will step in, even when incrementally, when market weak point seems.

August noticed each a rest in some residence buy restrictions and a high-profile acknowledgement by Chinese language Premier Li Qiang that the actual property hunch remained unresolved, indicating the necessity for extra assist.

The next month, gross sales by China’s high 100 builders rose 0.4% yr over yr, S&P mentioned, citing trade information.

As builders try to outlive, the report mentioned, “the tip outcome could also be a smaller market, but in addition a more healthy and extra resilient sector.”