China's Residential Property Market Analysis 2026

Reflecting still-elevated inventory and weak buyer confidence, the broad-based sales price correction in the Chinese housing market continues, although the pace of adjustment began to moderate in some stronger submarkets.

This extended overview from Global Property Guide covers key aspects of the Chinese housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Property Prices and Price Index
• Historic Perspective
• Property Demand Trends
• Property Supply Trends
• Rental Market: Rents and Rental Yields
• Mortgage Market and Interest Rates
• Economic and Social Factors

Property Prices and Price Index

China’s residential price correction continued in late 2025 and early 2026, reflecting weak buyer confidence, elevated inventory, and still-negative price expectations. The Index of Second-hand Residential Property Prices in Beijing, an aggregate indicator based on city-level data compiled by the National Bureau of Statistics of China (NBS), registered a 8.30% year-on-year decline in Q1 2026, or 9.22% decline in real terms after adjusting for inflation.

China's house price annual change:

The latest NBS city-level data suggests that this correction was still broad-based in April 2026, although the pace of adjustment was beginning to moderate in some stronger markets. First-tier cities showed some month-on-month improvement, but prices remained lower year-on-year across both new-build and second-hand segments, with resale prices still under greater pressure. Shanghai remained the main exception, with new-home prices continuing to rise year-on-year, supported by more resilient demand for selected projects in core locations.

Sales price indices movement in the commercial residential segment by city tier:

Private-sector data from the China Real Estate Index System (CREIS) shows the same divergence between selected new-build markets and the broader resale segment. As of April 2026, the average price of newly built residential properties across 100 monitored cities stood at RMB 17,129 (USD 2,504) per square meter, up 2.18% year-on-year, while second-hand homes averaged RMB 12,733 (USD 1,861) per square meter, down 8.34%. CREIS attributed the resilience in new-home prices to the faster release of improvement-oriented projects in selected key cities, including Shanghai, Shenzhen, and Hangzhou, while noting that the second-hand market remained in a bottoming phase.

Average house prices in Tier-1 cities:

The policy response is increasingly aimed at stabilizing the sector by easing both supply- and demand-side pressures, but its impact on prices remains gradual. The 2026 Government Work Report called for city-specific measures to control new real estate projects, reduce inventory, improve supply, and make better use of existing housing stock. Demand-side support has also focused on lowering transaction costs and improving affordability through tax relief, local easing of purchase restrictions, mortgage adjustments, and provident-fund measures. However, Morningstar’s survey evidence still points to weak sentiment, with only 11% of respondents expecting prices to rise in Q4 2025 and 17% planning to buy within six months.

Price stabilization is expected to remain gradual and uneven. S&P Global Ratings expects primary home prices to fall by 1.5%–2.5% in 2026, while secondary home prices are projected to decline by 4%–5%, reflecting continued pressure from weak demand and excess supply. Reuters’ March 2026 analyst poll points to a similar trajectory, with home prices expected to fall by 4.0% in 2026, stabilize in 2027, and rise only modestly by 0.5% in 2028. Overall, the outlook suggests that the new-build segment may find support earlier in stronger cities and higher-quality projects, while the resale market is likely to remain the main source of price weakness.

Historic Perspective:

From Property Boom to Managed Stabilization

China’s housing market has moved from a debt-fueled expansion cycle into a prolonged adjustment phase, with policy now focused on containing financial risks, completing unfinished projects, reducing excess inventory, and gradually restoring buyer confidence.

For more than a decade, real estate played an outsized role in China’s economy, household wealth, and local government finances. Rising home prices, limited alternative investment options for households, heavy developer borrowing, and local governments’ reliance on land sales supported a high-volume development model. By the late 2010s, however, affordability pressures and developer leverage had become increasingly difficult to sustain.

The turning point came in 2020, when the authorities introduced the “Three Red Lines” policy to curb excessive borrowing by developers. While intended to reduce financial risk, the tightening exposed the sector’s dependence on debt and pre-sales. The collapse of China Evergrande Group in 2021 then became the most visible sign of the crisis, with stress spreading to other private developers and raising concerns over the delivery of unfinished pre-sold homes. Mortgage boycotts by some homebuyers further weakened confidence and accelerated the decline in new-home demand.

The market continued to deteriorate through 2023 and most of 2024, as new construction, sales, and prices weakened amid developer liquidity constraints and cautious buyer sentiment. Policy support became more active in 2024, combining lower mortgage costs, reduced down payment requirements, easing of purchase restrictions in major cities, and financing support for eligible “whitelist” projects to secure home delivery.

By 2025 and early 2026, the policy approach had shifted more clearly from crisis response to managed stabilization. Demand-side support continued through tax relief, mortgage adjustments, local purchase-policy easing, and provident-fund measures, but the main emphasis moved toward controlling new project launches, reducing housing inventory, converting unsold homes for subsidized housing, and prioritizing the completion of existing projects. This marks a clear departure from the previous construction-led growth model, with the authorities now seeking to stabilize the market through a slower, more controlled adjustment.

Residential market dynamic (inventory, started and completed housing units, area of new housing units sold):

Data Source: NBS.

Property Demand Trends

Weak New Home Sales and a Continued Shift Toward the Resale Market

New home demand in China continued to weaken in 2025 and early 2026, reflecting cautious buyer sentiment, weak price expectations, and ongoing concerns over developer liquidity and project delivery. According to the NBS, residential new home sales totaled 732.99 million square meters in 2025, down 9.2% year-on-year, while residential sales value fell by 13.0% to RMB 7.33 trillion (USD 1.06 trillion). The decline continued into Q1 2026, with residential sales area falling by 13.1% year-on-year to 160.08 million square meters and sales value dropping by 18.5% to RMB 1.49 trillion (USD 215.39 billion).

Data Source: NBS.

The secondary housing market remained one of the more resilient sources of residential demand, although activity was uneven and largely price-sensitive. According to China Index Academy, 319,000 second-hand residential units were sold across 20 key cities in Q1 2026 through March 29, down 5.7% year-on-year, but still significantly above the level recorded in the same period of 2024. The agency also noted that second-hand homes accounted for about 72% of combined new and second-hand residential transactions in 30 cities in January-February 2026, up 7 percentage points compared with the 2025 full-year level. This points to a continuing shift in buyer demand toward existing homes, which are generally perceived as more certain in terms of delivery, location, and negotiability.

Analysts generally expect the housing market to stabilize only gradually. Morningstar’s Q1 2026 China real estate market commentary links the continued demand weakness to a downbeat outlook on home prices and weak consumer sentiment, and does not expect demand to rebound before 2027. Morningstar analyst Jeff Zhang told Reuters in May 2026 that “the property market has not yet bottomed out,” although sales and prices in higher-tier cities could stabilize first; he added that excess supply means the broader market may still need another one to two years to bottom. A separate Reuters poll also highlighted structural drags on demand, including demographics, employment uncertainty, affordability pressures, and high unsold inventory.

This cautious outlook is consistent with the policy direction seen in early 2026. Measures such as lower VAT on individual home resales from January 2026, additional local homebuying subsidies, and efforts to absorb excess inventory are expected to support market stabilization, but are unlikely to quickly restore broad-based demand. Policy support is therefore increasingly focused on reducing market imbalances and stabilizing expectations, rather than reigniting the earlier high-growth sales cycle.

Institutional forecasts remain subdued. S&P Global Ratings expects China’s nationwide primary property sales to fall by 10-14% in 2026 to around RMB 7.2-7.6 trillion (USD 1.04-1.10 trillion), citing the drag from excess supply. Fitch Ratings forecasts new-home sales value to decline by 7-8% to around RMB 7.0 trillion (USD 1.01 trillion) in 2026, with both gross floor area sold and average selling prices expected to fall, noting that policy support has not yet generated a sustained improvement in sales.

Property Supply Trends

Construction Pipeline Contracts as Destocking Becomes the Policy Priority

China’s housing supply pipeline continued to shrink in 2025 and early 2026, as weak sales, developer liquidity pressures, and official efforts to control new supply pushed the market further away from the previous high-volume construction model. According to NBS, residential new starts fell by 19.8% year-on-year to 429.84 million square meters in 2025, while residential completions declined by 20.2% to 428.30 million square meters. The contraction persisted into 2026. In January–March, residential new starts declined by 22.0% year-on-year to 74.20 million square meters, while completions fell by 26.5% to 69.83 million square meters.

Morningstar expects the pullback in construction to help contain future supply and inventory levels, broadly in line with the central government’s policy direction. At the same time, completions are seen to recover faster than new starts over the next few years, as project delivery remains a priority for both local governments and developers. This points to an increasingly differentiated supply cycle, where new project launches remain constrained, while the delivery of existing projects continues to receive policy support in order to stabilize buyer confidence.

Data Source: NBS.

Inventory pressure remains elevated, although the pace of increase has moderated. NBS data indicates that in 2025, total residential floor area for sale expanded by 2.8% year-on-year to 402.36 million square meters, marking a sharp deceleration from the 22.2% growth recorded in 2023. By March 2026, this figure had risen further to 427.71 million square meters, though the annual growth rate had eased to 1.4%, suggesting that completed residential inventory remains high, but the most acute phase of inventory accumulation may be passing.

Data Source: NBS.

Policy direction is now explicitly supply-side. The 2026 Government Work Report called for city-specific measures to control the number of new real estate projects, reduce housing inventory, and improve supply, while also encouraging the use of existing commodity housing stock mainly for government-subsidized housing. This approach was echoed by Chinese policy experts: Wu Jing, director of Tsinghua University’s Real Estate Research Center, noted that previous supply-demand mismatches and inventory pressure are now the main reason why many cities remain under strain, making supply-side measures such as controlling new supply, reducing inventory, and improving supply quality a precondition for broader market stabilization.

Looking ahead, supply is likely to remain more disciplined, especially in lower-tier and oversupplied cities. Morningstar expects new residential sales volume to exceed new starts by 40–70% during 2026–2030, helping contain inventory over time. It also forecasts annual landbank area supply of about 600 million square meters by 2030, well below the more than 800 million square meters recorded in 2025, as local governments prioritize inventory clearance over new project launches.

The outlook nevertheless remains fragile. Reuters reported in May 2026 that price declines had narrowed, but that a broader recovery could still take another one to two years due to oversupply and weak sector indicators. This points to a prolonged adjustment rather than a rapid supply rebound: completions may receive policy support, but new construction is likely to remain subdued until inventory is reduced more meaningfully and buyer confidence improves.

Rental Market: Rents and Rental Yields

Rents in Urban Centers Continue to Decline as Subsidized Supply Expands

According to the PBOC, annual rental inflation in China exceeded 1.2% in the pre-pandemic decade, but it has slowed significantly in recent years, not reaching positive territory since early 2024. In April 2026, the rent of the rental housing component of the consumer price index (CPI) showed a 0.6% year-on-year decline.

The continued decline in rents has been attributed to lower income expectations and increased supply of government-subsidized housing. Although not in direct competition with market-based housing, the subsidized segment influences tenant preferences and contributes to downward pressure on rents in the market-based rental sector.

“Growing supply, particularly from subsidized housing, is reshaping the market and forcing operators to compete more on service and efficiency,” said James MacDonald of Savills Research, summarizing the latest trends in the Q1 2026 Shanghai Residential Leasing report.

In this environment, the rental sector of the housing market continues to gradually recalibrate, with competition among landlords shifting towards reliable professional management, convenience, and safety. “New supply remains high, pushing occupancy and rents under pressure,” noted the 2026 China Property Outlook from Savills. “The temptation is to cut back on service, staff, and maintenance. Yet the operators gaining market share are doing the opposite: segmenting their product lines, defining their target customers more clearly, strengthening operational consistency, and building recognizable brand identities. Professionalization — not scale — is becoming the marker of success.”

Data Source: NBS.

In nominal terms, according to CREIS data for 50 cities across China, the average listed monthly rent in April 2026 stood at RMB 34.0 (USD 5.0) per square meter, down 0.05% month-on-month and 3.38% year-on-year. On the regional level, conditions varied significantly across the submarkets. Beijing, Shenzhen, Shanghai, Hangzhou, and Guangzhou remained the most expensive urban centers; all five cities, however, recorded a drop in average rents over the last twelve months.

Average monthly rents in selected cities:

Overall, the rental sector in China continues to expand amid the ongoing transformation of the property market, attracting institutional investors and being seen by the authorities as one of the key development directions (especially for activating the existing housing stock). The previously implemented government incentives included tax benefits, a dedicated supply of land for rental housing projects, and increased credit availability through targeted lending facilities from the central bank. According to Savills, over 200 housing leasing-related policies were introduced at the local level in 2024, focusing on enhancing industry regulation and strengthening policy support to improve the rental housing environment from both the supply and demand sides and stabilize the market.

Last year, the government unveiled China’s first administrative-level regulation for the rental market: a housing rental ordinance, which went into effect in September 2025. The new regulation aims to standardize rental activity, protect the legal rights of both landlords and tenants, and stabilize long-term rental relationships. It also gives more weight to institutional landlords, encouraging investment and professionalization of the sector.

More recently, the authorities also announced the extension of preferential tax policies for public rental housing until the end of 2027 and guided local authorities to optimize their policies to ensure access to public rental housing for a wider range of residents, including migrant workers and new urban residents without local household registration.

Mortgage Market and Interest Rates

Mortgage Rates Stabilizing at Historically Low Levels, Demand Yet to Recover

China’s main lending benchmark, the loan prime rate (LPR), calculated by National Interbank Funding Center (NIFC) based on 20 quoting banks’ actual loan rates granted to their best clients and interest rate of open market operations and authorized by the PBOC, has been on a long-term downward trajectory, most recently reduced by 10 b.p. in May 2025 and maintained at 3.0% for 1Y LPR and 3.5% for 5Y LPR since.

China's mortgage loan interest rates:

Following the overall trajectory of the 5Y LPR, on which many lenders base their mortgage rates, the weighted average interest rate on new mortgages, reported by the PBOC on a quarterly basis, also fell to historically low levels. Most recently, it was recorded at 3.06% in December 2025, unchanged since last June, but 0.39 points down from a year earlier and 1.05 points down from two years earlier.

In their latest Real Estate Market Pulse, Morningstar estimates that average mortgage rates for most cities in China remained flat in Q4 2025, in line with the benchmarks, but can be expected to moderate later this year. “Despite only one rate cut by the People’s Bank of China in 2025, we foresee further easing in 2026 as the central bank aims to extend monetary stimulus,” said the report. “As such, we expect homebuyers’ borrowing costs to continue moderating, particularly benefiting property upgraders in large cities.”

Data Sources: PBOC, China Foreign Exchange Trade System (CFETS).

Although stabilized mortgage costs, along with improved affordability, are generally seen as conducive to housing sales, according to Morningstar, new lending activity still weakened in the fourth quarter of 2025, in line with soft home demand. A gradual recovery in buyer sentiment in wealthier cities and renewed growth in the issuance of mortgage loans are now expected only in 2027.

Against this background, the balance of personal housing loans maintained by China’s financial institutions remained on a downward trajectory, it has been on since 2022, following a period of rapid expansion (19% annual increase, on average) between 2013 and 2021. The total value of outstanding housing loans to households reported by the PBOC fell by 1.8% in 2025 and by a further 0.8% by the end of Q1 2026, reaching RMB 36.72 trillion (USD 5.30 trillion). Sized against the national economy, the stock dropped from 33.3% of GDP at current prices in 2020 to an estimated 26.4% in 2025.

Data Sources: PBOC, NBS.

Economic and Social Factors

Growth to Moderate Further, Inflation Remains Low

While demonstrating resilience in the face of multiple shocks, China’s economy has been on a decelerating trajectory in recent years, impacted by the pandemic, property market correction, and structural headwinds such as weakening productivity and labor force growth. According to the International Monetary Fund (IMF) figures, the country’s real GDP growth reached 5.0% in 2025 (unchanged from 2024), but is projected to moderate to 4.4% in 2026 and 4.0% in 2027, reflecting the prolonged effects of tariffs and trade policy uncertainty.

In parallel with the economic slowdown, consumer price index (CPI) inflation in China has dropped from the annual average of 2.0% in 2022 to 0.0% in 2025, and was most recently reported by the NBS at 1.2% in April 2026. The IMF expects deflationary pressures to persist, with inflation projected to rise only gradually over the next two years (1.2% in 2026 and 1.5% in 2027) amid continued economic slack.

”China is better cushioned, though not immune, from the oil shock as higher energy prices still pose risks through adverse terms of trade and downstream margin compression,” Grant Feng of Vanguard noted in a recent outlook for the national economy. “At the same time, an upswinging AI cycle is providing a strong offset to external shocks.”

Data Source: IMF.

Amid a general economic slowdown, China’s labor market is experiencing certain constraints as well. Wage growth markedly decelerated over the recent years, and while the overall urban surveyed unemployment rate published by the NBS is relatively low (fluctuating between 5.0% and 5.5% in the last two years and most recently reported at 5.2% in April 2026), the indicator remains elevated for younger population groups.

In April, the urban survey unemployment stood at 7.4% for the 25-29 age group (excluding students) and 16.3% for the 16-24 age group (excluding students). According to the Organization for Economic Co-operation and Development (OECD), significant underemployment is also observed in rural areas not included in this survey.

Analysts cited by Reuters in May 2026 expect China’s labor market to worsen in the coming months, as “factories face higher costs due to the Iran war, while AI adoption accelerates, and a record 12.7 million university graduates this summer begin job hunting”.

Data Source: NBS.

In general, the transition to lower growth is seen as consistent with China’s authorities’ goal to pursue high-quality growth and reduce the imbalances and vulnerabilities that have emerged, most notably with the significant build-up of debt. According to IMF figures, the country’s general government gross debt ballooned from 40.8% of GDP in 2015 to an estimated 99.2% in 2025 and is forecast to keep expanding in the future.

In the spring of 2025, reflecting expectations of continued weakening of China's public finances and a rapidly rising public debt trajectory during the economic transition, Fitch Ratings downgraded China’s standing from ‘A+’ to ‘A’, with a stable outlook.

According to the IMF assessment, risks around China’s economic outlook remain tilted to the downside. Domestically, the main risk is still a deeper-than-expected contraction in the property sector, which, combined with high debt levels, could contribute to greater demand weakness, entrenched deflation, and continued reliance on exports. Externally, renewed escalation of trade tensions is among the key downside risks to growth.

Sources:

1. State Council of the Republic of China
   1. Government Work Report: https://english.www.gov.cn/
   2. China Unveils Regulations on Housing Rental Sector: https://english.www.gov.cn/
   3. China to Expand Access to Public Rental Housing: https://english.www.gov.cn/
   4. China Extends Preferential Tax Policies for Public Rental Housing: http://www.china.org.cn/
2. National Bureau of Statistics of China (NBS)
   1. National Data: https://data.stats.gov.cn/
   2. Basic Situation Of National Real Estate Market In 2025 (CN): https://www.stats.gov.cn/
   3. Basic Situation Of National Real Estate Market in January – March 2026 (CN): https://www.stats.gov.cn/
   4. Interpretation of the Statistical Data on Changes in Commercial Housing Sales Prices in April 2026 (CN): https://www.stats.gov.cn/
   5. Consumer Price Index in April 2026: https://www.stats.gov.cn/
   6. National Economy Maintained the Development Momentum of Steady Progress in the First Four Months: https://www.stats.gov.cn/
3. People’s Bank of China (PBOC)
   1. Monetary Policy Reports: http://www.pbc.gov.cn/
   2. LPR: http://www.pbc.gov.cn/
   3. Statistical Report on the Credit Structure of Financial Institutions (Q1 2026): https://www.pbc.gov.cn/
   4. Financial Statistics Report (April 2026): https://www.pbc.gov.cn/
4. State Tax Administration
   1. Policy Navigation (CN): https://fgk.chinatax.gov.cn/
   2. Announcement on Continuing the Implementation of Relevant Individual Income Tax Policies…(CN): https://fgk.chinatax.gov.cn/
5. China Foreign Exchange Trade System (CFETS)
   1. LPR Historical Data: https://www.chinamoney.com.cn/
6. China Real Estate Index System (CREIS)
   1. CREIS China Residential House Price Index in 100 Cities Monthly, April 2026, Press Release (CN): https://www.cih-index.com/
   2. 50-city Residential Rental Price Index (CN): https://www.cih-index.com/
7. China Index Academy
   1. Monthly Report on Second-hand Housing Market in Key Cities, March 2026 (CN): https://www.cih-index.com/
8. Bank of International Settlements (BIS)
   1. Selected Residential Property Prices, Nominal, Index, 2010=100: https://data.bis.org/
9. International Monetary Fund (IMF)
   1. Country Overview: People’s Republic of China: https://www.imf.org/
   2. 2025 Article IV Staff Report: https://www.imf.org/
   3. 2024 Article IV Staff Report: https://www.imf.org/
10. Organisation for Economic Co-operation and Development (OECD)
    1. China: Foundations for Growth and Competitiveness 2026: https://www.oecd.org/
11. World Bank
    1. China MPO, April 2026: https://thedocs.worldbank.org/
12. Morningstar
    1. China Real Estate Market Pulse Q1 2026: https://www.morningstar.com/
13. KPMG
    1. China Economic Monitor. Issue: 2026 Q1: https://assets.kpmg.com/
14. S&P Global Ratings
    1. China Property Watch: The Chilling Effects Of Polarization: https://www.spglobal.com/
15. Fitch Ratings
    1. China Homebuilders Outlook 2026: https://www.fitchratings.com/
    2. Fitch Downgrades China to 'A'; Outlook Stable: https://www.fitchratings.com/
16. Savills
    1. China Property Outlook 2026: https://pdf.savills.asia/
    2. Shanghai Residential Leasing, Q1 2026: https://pdf.savills.asia/
17. Vanguard
    1. Our Economic Outlook for China: https://corporate.vanguard.com/
18. Reuters
    1. China’s Home Prices Seen Falling Faster Before Stabilizing in 2027: Reuters Poll: https://www.reuters.com/
    2. China’s Home Price Falls Narrow, But Recovery May Be Months Away: https://www.reuters.com/
    3. China Home Prices to Fall 3.7% This Year, Extending Declines Into 2026…: https://www.reuters.com/
    4. China’s New Home Prices Extend Decline as Weak Demand Hounds Sector: https://www.reuters.com/
    5. China Leaves Lending Benchmarks Unchanged for 12th Month in May: https://www.reuters.com/
    6. Job Ad for Shepherds Goes Viral in China, Exposing Labor Market Strains: https://www.reuters.com/
19. China Daily
    1. China Unveils Regulations on Housing Rental Sector: https://www.chinadaily.com.cn/
20. Economic Observer Online
    1. The Youth Unemployment Rate Rose to 17.8%... (CN): https://www.eeo.com.cn/
21. Xinhua News Agency
    1. First-Hand Observations on the Real Estate Market (CN): https://www.news.cn/