China's Residential Property Market Analysis 2025

Impacted by structural issues such as unsold inventory and low affordability, sales prices and transaction volumes in the primary segment of the Chinese housing market continue to fall, although the pace of decline shows tentative signs of moderation.

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

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

The broad price correction that began in China's housing market in late 2021 has continued, although the pace of decline has shown tentative signs of moderation. The Index of Selected Residential Property Prices, an aggregate indicator based on city-level data compiled by the National Bureau of Statistics of China (NBS) and reported by the Bank for International Settlements (BIS), registered a 6.40% year-on-year contraction in Q2 2025, or 6.38% in real terms after adjusting for inflation.

China's house price annual change:

Note: China (Beijing) House Price Index: Second-Hand Residential Buildings (2015=100).
Data Source: National Bureau of Statistics of China (NBSC).

In response, the central government has maintained its focus on stabilizing the real estate sector through a coordinated policy approach aimed at mitigating systemic risks, supporting reasonable housing demand, and promoting high-quality urban development. Recent policy actions include targeted interest rate reductions, measures to reduce unsold housing inventory, and accelerated urban renewal initiatives. "Stabilizing the property market remains a key priority for this year's economic agenda. To sustain housing price stability and improve sentiment, further policy support is still required," commented KPMG.

Year-on-year declines in commercial residential property prices have narrowed across city tiers, though prices remain in negative territory. As of September 2025, NBS data show that newly built home prices in first-tier cities fell slightly by 0.7% year-on-year, supported in part by strong luxury home sales in core areas of Shanghai, while second-hand home prices declined by 3.2% year-on-year. The rate of price declines in tier-two and tier-three cities also moderated modestly but remained significantly steeper than in first-tier markets.

Sales price indices movement by city tier:

According to the China Real Estate Index System (CREIS), as of October 2025, the average price of newly built residential properties across 100 monitored cities stood at RMB 16,973 (USD 2,389) per square meter, while second-hand homes averaged RMB 13,268 (USD 1,867) per square meter. Among first-tier cities, Shanghai recorded the strongest growth in new-home prices, up 10.70% year-on-year. However, second-hand home prices continued to decline across all first-tier cities. "Softening in secondary home prices in tier-one cities indicates that demand in such cities is mainly coming from upgraders: buyers seeking higher-quality units in the primary market. <…> Secondary homes, in our view, are much less competitive," noted S&P Global.

Average house prices in Tier-1 cities:

Looking ahead, China's housing market is expected to follow a gradual and uneven path toward stabilization. A Reuters poll conducted in late August to early September 2025 forecasts new-home prices to fall 3.8% in 2025 and a further 0.5% in 2026, before returning to modest growth in 2027. However, forecasts vary widely, reflecting uncertainty surrounding the pace of demand recovery.

Despite recent easing measures, property sales and investment are still projected to contract, with subdued income expectations and elevated housing inventories, particularly in smaller cities, continuing to weigh on buyer sentiment. Many analysts now anticipate stabilization no earlier than late 2026 or 2027, with some suggesting that more direct government intervention, potentially including fiscal measures to absorb surplus housing stock, may be necessary to accelerate adjustment and restore market confidence.

China's Property Bubble:

The Crisis, Government Action, and Future Prospects

China's current property crisis stems from the central role of real estate in its economy, which drove rapid growth and contributed about 20% of economic activity. For a decade before the pandemic, housing prices surged relative to household incomes, partly because consumers, facing limited attractive savings options, increasingly invested in property. This fueled heavy borrowing by developers, while local governments became dependent on land sales for revenue.

In 2020, to address concerns about the overheating market, the Chinese authorities introduced the "Three Red Lines" policy aimed at curbing speculative behavior and excessive corporate debt. The policy imposed strict limits on developers' leverage and liquidity, while banks were restricted from lending to these firms. This credit squeeze then contributed to the collapse of overleveraged developers.

The consecutive fall of China Evergrande Group in 2021, with over USD 300 billion in liabilities, exposed the sector's vulnerability. The crisis quickly spread to other developers, such as Sunac China and Fantasia Holdings, leading to a wave of defaults. As property sales plummeted, many developers who relied on pre-sales to finance construction struggled to finish projects. In response, numerous homebuyers launched a "mortgage boycott", refusing to make payments on unfinished apartments.

Real estate activity has since sharply contracted. By 2023, housing starts had dropped by more than 60% from pre-pandemic levels, marking one of the largest housing busts globally in decades. This decline was exacerbated by homebuyers' concerns about developers' financial health and uncertain property prices, with demand reaching a 13-year low.

Throughout most of 2024, the market continued to weaken. The first three quarters saw further declines in new residential construction, sales, and prices, as buyers remained cautious and developers struggled with liquidity constraints. In response, the government unveiled a comprehensive set of policy measures aimed at restoring market confidence and supporting broader economic stability.

These measures included interest rate cuts, lower down payment requirements, and the easing of purchase restrictions, making homeownership more accessible. Financing support was extended to ensure the delivery of delayed projects, while the removal of buying restrictions and price caps helped revive transaction volumes. Eliminating land price ceilings improved profitability for developers, encouraging the launch of more high-end projects and raising first-hand prices in key cities. Meanwhile, unsold housing stock began to be repurposed or purchased for affordable housing, and idle land was redirected toward more productive uses. Stricter pre-sale regulations, though likely to slow immediate sales, aimed to restore homebuyer trust by ensuring project completion.

While initial reactions to these policy shifts were cautious, early signs of stabilization emerged in November and December 2024. Price declines began to narrow, and first-tier cities reported a modest recovery in market activity. However, overall conditions remain far from pre-crisis levels. A more sustained recovery and broader stabilization of the sector are anticipated by late 2026 or early 2027.

New Directives introduced in October-December 2024:

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

Data Source: NBS.

Demand Highlights:

Gradual Adjustment Continues as Market Searches for a Bottom

New home sales continued to decline, though the pace of contraction moderated compared with previous years. According to the NBS, a total of 814.5 million square meters of new housing were sold nationwide in 2024, representing a 14.1% year-on-year decrease, following sharper drops of 17.3% in 2022 and 25.8% in 2021. The downward trend extended into the first half of 2025, with sales totaling 383.6 million square meters, 4.4% lower than a year earlier. In value terms, primary home sales reached RMB 3,884.9 billion during the same period, marking a 5.9% year-on-year decline.

While data indicate a slower rate of contraction, the market has yet to find a clear bottom. A brief rebound in late 2024, supported by policy easing, lost momentum by mid-2025 as the effects of stimulus measures waned. According to Morningstar, the second half of the year is likely to prove "more challenging due to tougher comparisons and a higher base," which may necessitate further fiscal support, including home-buying vouchers and tax incentives. Efforts to reduce excess property and land inventories are seen as constructive steps toward stabilizing prices. At the same time, easing mortgage costs and rising household incomes are gradually improving housing affordability.

Data Source: NBS.

Forecasts suggest that new home sales will remain subdued through 2025 before a modest recovery begins. Morningstar expects sales values to decline by about 10% in 2025, followed by a mild rebound in 2026 as lower prices and policy relaxation stimulate demand. S&P Global projects a smaller drop of 8% in 2025 and a further 6-7% in 2026, reflecting ongoing market adjustment. Fitch Ratings offers a slightly more optimistic view, revising its 2025 forecast to a 7% decline from a previously expected 15%, citing stronger-than-anticipated performance in the first half. However, Fitch cautions that structural risks persist and that sales polarization across city tiers is likely to continue.

Amid these broader market adjustments, buyer preferences are also evolving. Although off-plan homes still account for the majority of new residential sales, their market share has dropped sharply, from 90% in 2021 to 68% by June 2025, as concerns over project delivery remain. In the first half of 2025, the sold area of off-plan homes declined by 11.6% year-on-year, while transactions of completed new units rose by 15.5%. Morningstar notes that this shift is likely to persist, supported by continued government purchases of completed housing inventory.

Data Source: NBS.

Meanwhile, the secondary housing market showed mixed but relatively more stable performance in the first half of 2025. Data from the China Index Academy indicate that 876,700 existing homes were sold across 30 key cities between January and June, up 12.1% year-on-year. In June alone, 144,700 second-hand residential units changed hands, a 3.5% decline from the previous year, reflecting a high base effect and more cautious sentiment. Regional performance varied significantly: among the first-tier cities, Beijing (+1.0%), Guangzhou (+16.7%), and Shenzhen (+7.9%) posted moderate growth, while Shanghai (-23.1%) experienced a sharp decline. Second-tier markets such as Chengdu and Xi'an remained resilient, contrasting with contractions in Nanjing and Hangzhou, underscoring the increasingly polarized nature of the market.

Morningstar notes that secondary-market activity remains more resilient than the primary market, even as elevated resale supply continues to limit price recovery and transaction growth remains uneven across city tiers. Analysts expect demand for second-hand properties to stay relatively steady in core urban areas, where limited new supply and improving affordability sustain buyer interest, while smaller cities may face a more protracted adjustment period.

Supply Highlights:

Supply-Side Contraction Paves the Way for Inventory Absorption

Driven by sluggish landbank acquisitions and muted presale activity in preceding years, China's residential construction sector experienced a notable contraction in 2024. According to NBS, the total area of residential projects started declined by 22.55% year-on-year to 536.6 million square meters, while the total area of completed residential units fell by 25.81% to 537 million square meters.

This downward trajectory persisted into 2025. During the first half of the year, the area of newly started residential units contracted by 19.68% year-on-year, and completions declined by 15.54%. Analysts at Morningstar observed that the moderation in completions could help alleviate pressure on housing supply and inventory levels. On the financing front, commercial banks approved RMB 6.7 trillion in special loans to support the completion of ongoing projects, helping to mitigate disruptions in the delivery of presold properties.

Data Source: NBS.

Concurrently, inventory levels have reached their highest point since 2018. NBS data indicate that in 2024, the total residential area available for sale expanded by 18.02% year-on-year to 390.88 million square meters, marking a deceleration from the 22.90% growth recorded in 2023. By June 2025, this figure had risen further to 408.21 million square meters, though the annual growth rate had eased to 6.62%.

Morningstar experts cited "faster clearance under heavier discounts by developers and moderating home supply," and anticipate that local governments will intensify efforts to absorb unsold housing inventory in the coming months, aligning with central policy directives. "A larger fraction of the CNY 300 billion funding scheme will be used on buying idle homes," the report noted.

Data Source: NBS.

Rental Market:

Rents in Urban Centers Still in Decline, New Regulation Enacted to Standardize Rental Activities

While, according to the PBOC, in the pre-pandemic decade, annual rental inflation in China exceeded 1.2%, it slowed significantly in recent years and has been negative since early 2024. In October 2025, the rent of the rental housing component of the consumer price index (CPI) showed a 0.1% year-on-year decline.

"In recent years, rents have declined due to lower income expectations and the increase in government-subsidized housing supply. This has provided tenants with more options and increased bargaining power, making lease renewals a key challenge for leasing companies," experts from Savills noted in their 2025 Chinese Real Estate Market Outlook earlier this year. Although not in direct competition with market-based housing, the subsidized segment is influencing tenant preferences and contributes to downward pressure on rents in the market-based rental sector.

Data Source: NBS.

In nominal terms, according to the CREIS data on 50 cities across China, the average listed monthly rent in October 2025 stood at RMB 34.6 (USD 4.9) per square meter, 0.49% down month-on-month and 3.63% down 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.

More recently, 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.

Mortgage Market:

Easing Borrowing Costs Expected to Support Home Sales

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.

"The PBOC continued to improve the market-oriented interest rate adjustment framework," the central bank commented in the Q2 2025 monetary policy report. "In May, the policy interest rate was cut by 0.1 percentage points, interest rates on structural monetary policy instruments were reduced by 0.25 percentage points, and interest rates on personal housing provident fund loans were also lowered by 0.25 percentage points. In addition, the PBOC strengthened implementation of the interest rate policy to bring down both deposit and loan 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, was most recently recorded at 3.06% in June 2025, 0.39 points down from a year ago and 1.05 points down from two years ago. In their Q3 2025 China Real Estate Market Pulse, Morningstar estimates that average mortgage rates for most cities in China also dropped 10 basis points in the second quarter of 2025, in line with the benchmark.

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

Morningstar experts see easing mortgage costs, along with rising affordability, as conducive to home sales across China. "While Tier 1 cities, namely Beijing, Shanghai, Guangzhou, and Shenzhen, have higher mortgage costs than lower-tier cities, we don't foresee a material negative impact on these high-income areas. More affordable properties, coupled with lower mortgage costs, could continue to stimulate home transactions, in our view," says their latest assessment.

While new mid- to long-term household loans (mostly mortgages) in Q2 2025 were almost unchanged compared to the same period last year, according to Morningstar, looking forward, a gradual rebound in new mortgage issuance and home sales can be expected.

The early signs of recovery, however, are yet to reflect in the balance of personal housing loans maintained by China's financial institutions, which, after a period of rapid expansion (19% annual increase, on average) between 2013 and 2021, slowed to 1.3% growth in 2022 and has been in decline since. The total value of outstanding housing loans to households reported by the PBOC fell by 1.6% in 2023 and 1.3% in 2024. In the nine months of 2025, outstanding housing loans moderated the previously recorded slide, but continued to decline, standing at RMB 37.44 trillion (USD 5.23 trillion) at the end of Q3 2025 (-0.6% since the beginning of the year). Sized against the national economy, the stock dropped from 33.3% of GDP at current prices in 2020 to 27.9% in 2024.

Data Sources: PBOC, NBS.

Socio-Economic Context:

Growth Continues to Slow, Inflation Remains Low

China's growth has been on a general deceleration trajectory in recent years, reflecting the impact of 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 slowed from 5.4% in 2023 to 5.0% in 2024, and the indicator is currently projected to moderate further, reaching 4.8% in 2025 and 4.2% in 2026.

Despite uncertainties tied to the trade conflict with the US, growth has remained resilient, albeit slowing, in 2025, supported by accommodative macroeconomic policies and export strength. "A trade truce with the US scaled back China's effective tariff rate from 42% to 32%, which should support China's near-term export growth. The truce also reduces policy uncertainty, potentially encouraging corporate capital expenditures. Planned high-level visits signal a mutual willingness to compromise, reducing the likelihood of poor trade outcomes in the near term. However, the risk of renewed trade tensions cannot be ruled out," experts from Vanguard commented in their recent outlook for the national economy.

In parallel with the economic slowdown, consumer price index (CPI) inflation in China has dropped from 2.0% in 2022 to just 0.2% in 2023 and 2024, and was most recently reported by the NBS at 0.2% year-on-year, only a slight uptick from negative values of -0.3% and -0.4 observed in the previous two months. The IMF currently projects annual inflation in the country to halt at 0% in 2025 before re-accelerating to 0.7% in 2026.

Data Source: IMF.

Against the backdrop of the general economic slowdown, China's labor market is experiencing certain constraints as well. While the overall urban surveyed unemployment rate published by the NBS eased modestly from a 6.1% peak in April 2022 to 5.2% in September 2025, the indicator remains much more elevated for younger population groups. In September, the urban survey unemployment stood at 7.2% for the 25-29 age group (excluding students) and 17.7% for the 16-24 age group (excluding students).

A macroeconomic expert cited by Economic Observer Online stated that, based on data from the population census and other sources, the supply of young labor will continue to rise until 2030, and the increase in the number of college graduates can be expected to further increase employment pressure on young people.

As the country continues to grapple with a slowing economy and the impact of trade tensions with the US, the government recently announced new measures to stabilize employment, including expanded social insurance subsidies, special loans, and targeted support for young people looking for jobs.

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 the IMF figures, the country's general government gross debt ballooned from 39.3% of GDP in 2014 to 88.3% in 2024 and is forecast to keep expanding in the future.

Earlier this year, reflecting expectations of a 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. "In our view, sustained fiscal stimulus will be deployed to support growth, amid subdued domestic demand, rising tariffs, and deflationary pressures. This support, along with a structural erosion in the revenue base, will likely keep fiscal deficits high. <…> China's strengths, including its large and diversified economy, solid GDP growth prospects relative to peers, integral role in global trade, and robust external finances, will balance fiscal challenges at the new rating level," said the corresponding rating action commentary from Fitch.

Sources:

1. State Council of the Republic of China
   1. China Unveils Regulations on Housing Rental Sector: https://english.www.gov.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 2024 (CN): https://www.stats.gov.cn/
   3. Basic Situation of National Real Estate Market in the First Half of 2025: https://www.stats.gov.cn/
   4. Interpretation of the Statistical Data on Changes in Commercial Housing Sales Prices in September 2025 (CN): https://www.stats.gov.cn/
   5. Investment in Real Estate Development in the First Half of 2025: https://www.stats.gov.cn/
   6. The National Economy Operated Generally Smoothly in October, Maintaining a Steady and Progressive Trend (CN): https://www.stats.gov.cn/
   7. Consumer Price Index (CPI) is projected to rise 0.2% year-on-year in October 2025 (CN): 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 (Q3 2025): http://www.pbc.gov.cn/
   4. Financial Statistics Report (August 2025): http://www.pbc.gov.cn/
4. China Foreign Exchange Trade System (CFETS)
   1. LPR Historical Data: https://www.chinamoney.com.cn/
5. China Real Estate Index System (CREIS)
   1. CREIS China Residential House Price Index in 100 Cities Monthly, October 2025, Press Release: https://fdc.fang.com/
   2. 50-city Residential Rental Price Index (CN): https://www.cih-index.com/
6. China Index Academy
   1. Monthly Report on Second-hand Housing Market in Key Cities, June 2025 (CN): https://www.cih-index.com/
7. Bank of International Settlements (BIS)
   1. Selected Residential Property Prices, Nominal, Index, 2010=100: https://data.bis.org/
8. International Monetary Fund (IMF)
   1. Country Overview: People's Republic of China: https://www.imf.org/
   2. 2024 Article IV Staff Report: https://www.imf.org/
9. Organization for Economic Co-operation and Development (OECD)
   1. OECD Economic Outlook, Volume 2025 Issue 1: https://www.oecd.org/
10. Morningstar
    1. China Real Estate Market Pulse Q3 2025: https://www.morningstar.com/
11. KPMG
    1. China Economic Monitor. Issue: 2025 Q3: https://assets.kpmg.com/
12. S&P Global Ratings
    1. China Property Watch: The Chilling Effects Of Polarization: https://www.spglobal.com/
13. Fitch Ratings
    1. China Property Market's Polarised Performance Leaves Risks Elevated: https://www.fitchratings.com/
    2. Fitch Downgrades China to 'A'; Outlook Stable: https://www.fitchratings.com/
14. Savills
    1. Chinese Real Estate Market Outlook, Feb 2025: https://pdf.savills.asia/
15. Vanguard
    1. Our Economic Outlook for China: https://corporate.vanguard.com/
16. Reuters
    1. China's Home Prices to Fall Less Than Previously Expected, but Market Still Weak: Reuters Poll: https://www.reuters.com/
    2. China Unveils New Steps to Aid Employment Amid Trade Tensions: https://www.reuters.com/
17. China Daily
    1. China Unveils Regulations on Housing Rental Sector: https://www.chinadaily.com.cn/
    2. China to Roll Out Measures to Keep Employment, Economy Stable: Official: https://www.chinadaily.com.cn/
18. Economic Observer Online
    1. The Youth Unemployment Rate Rose to 17.8%... (CN): https://www.eeo.com.cn/