China's Housing Market Facing Long Slump
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The devastating property crisis that broke out in China after the collapse of giants like Evergrande is far from being resolved, experts say, as new home prices in the country continue falling and new construction projects get cut down.
The sector has gone "from a free fall" in the years following Evergrande's default in 2021 "to a gradual fall" today, Zhaopeng Xing, senior China strategist at ANZ, told Newsweek.
What Is Happening In China's Property Market?
China's property market has propelled the country's explosive economic growth over the past few decades, single-handedly lifting hundreds of millions of Chinese people out of poverty and into the middle class.
But since the collapse of giant developers like Evergrande and Country Garden, the sector has been sinking, threatening to drag the Chinese economy down with it.
Despite efforts from the government to revive the struggling property sector, which was once the country's economic powerhouse, recent data show that it is still unable to walk on its own feet and demand is failing to pick up.
High-rise buildings under construction stand behind a Chinese national flag waving in the foreground, as cranes continue work on partially completed towers on May 07, 2025, in Chongqing, China.
High-rise buildings under construction stand behind a Chinese national flag waving in the foreground, as cranes continue work on partially completed towers on May 07, 2025, in Chongqing, China.New home prices fell 0.22 percent in 70 Chinese cities in May, the largest decline in seven months, according to figures from the National Bureau of Statistics. Existing home prices fell by an even bigger 0.5 percent, marking the steepest decline in eight months. In the same month, residential sales by value dropped 6.1 percent year-on-year, while real-estate investment plunged 12 percent from a year earlier.
Kent Deng, professor of economic history at the London School of Economics (LSE), told Newsweek that there has been "no real recovery so far" in the Chinese market.
"It is a story of housing oversupply," he said. "China has had 600 million permanent buildings, roughly two people a building. It will take 30-50 years to absorb them," he added. This same oversupply is leading prices to fall and new construction projects to be cut down.
What Does This Mean for the Country?
The latest data show that even the Chinese government policy interventions are failing to make a real dent in the situation facing homebuyers in the country, who are struggling with growing economic uncertainty linked to the trade war with the U.S. and income instability.
But the central government seems determined to try to support the sector, with Premier Li Qiang pledging action during a state council meeting last week, according to state broadcaster CCTV. They might have a hard time getting the property sector out of the current slump, experts said.
"Recovery will be slow as people do not have more purchasing power to buy new houses," Deng told Newsweek.
The property sector plays an outsize role in China's economy, contributing to nearly a third of its GDP. Further contractions could continue hurting the country, experts said.
"China's property market values 600 trillion yuan [$83.5 billion]," Xing said. "A 10-percent price fall means 60-trillion-yuan loss to households. The negative wealth effect will curb consumption and investment," he said.
According to Xing, new development will not pick up in the next decade in China "as urbanization will likely come to an end by 2035," he said.
In a report released on Monday, Goldman Sachs experts said that demand for new homes in China is likely to remain substantially below its 2017 peak over the next few years, especially as the country's population shrinks and continues aging.
"We calculate that annual demographic demand in urban China will average only 4.1 million housing units per year in 2025-2030, compared to 9.4 million units per year in the 2010s," researchers wrote in the report shared with Newsweek. "It is striking that China's demographic demand for new urban housing likely halved within a decade."
It could be a dramatic change for a country that has built its economic backbone on the property sector. While China has been trying to shift its economy away from the housing market, the result has not been good, Deng said, "because investment opportunities are very limited outside the housing market."
"China will have to switch the property sector from a construction-based model to a service-like model. The transformation will change a lot of policies including land finance," Xing said.
"The sector will be like real estate in other developed economies; 75-percent value added will be housing rents, not new home sales," he said. "The economy will shift away from property construction, but not real-estate services. The latter will play a bigger role in the economy."
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