China’s residential property market continues to navigate a period of significant adjustment in 2025, as lingering structural issues and affordability challenges weigh on both sales and prices. After a decade of rapid expansion, the market has been grappling with unsold inventory, falling transaction volumes, and declining confidence, particularly in the primary segment of the housing sector.
Recent data suggest that while sales prices continue to decline, the pace of contraction has begun to moderate, signaling the earliest signs of market stabilization. According to the National Bureau of Statistics of China (NBS), the Index of Selected Residential Property Prices—a measure tracking city-level property trends—showed a 6.40% year-on-year drop in Q2 2025. Adjusted for inflation, this represents a 6.38% real decline, reflecting a slowdown compared with steeper contractions in previous years.
Policymakers have responded with a mix of targeted measures to stabilize the sector. Central government interventions include interest rate reductions, accelerated urban renewal projects, and strategies to reduce unsold inventory, all aimed at mitigating systemic risks and supporting reasonable housing demand. Analysts at KPMG note that “stabilizing the property market remains a key priority for this year’s economic agenda, with further policy support still required to sustain housing price stability and buyer sentiment.”
Primary Market Performance: Uneven Recovery Across Cities
First-tier cities have shown a more resilient profile. Newly built homes in Shanghai, for example, posted a 10.7% year-on-year increase in new-home prices, buoyed by luxury and high-end demand. However, second-hand home prices in these cities continued to slide, highlighting a growing polarization between primary and secondary markets. Tier-two and tier-three cities, by contrast, remain under significant pressure, with steeper declines in both new and existing home prices.
In terms of absolute pricing, the China Real Estate Index System (CREIS) reported that, as of October 2025, the average price for newly built residential properties across 100 monitored cities stood at RMB 16,973 (USD 2,389) per square meter. Second-hand homes averaged RMB 13,268 (USD 1,867) per square meter. Despite moderation in price declines, buyers remain cautious, and new-home sales are projected to remain subdued through 2025, with a gradual recovery expected only in 2026 or 2027.
The Roots of the Crisis
China’s property woes are deeply rooted in the sector’s outsized role in the economy. Real estate has historically contributed about 20% of GDP growth, attracting both household savings and heavy developer borrowing. The “Three Red Lines” policy, introduced in 2020 to curb excessive leverage, restricted bank lending and forced developers to reduce debt, leading to a wave of defaults among overleveraged firms like China Evergrande Group, Sunac China, and Fantasia Holdings.
The resulting property market contraction has been severe. Housing starts dropped by over 60% from pre-pandemic levels, while pre-sale financing—once the main driver of construction—collapsed. Homebuyers, fearing unfinished projects, initiated “mortgage boycotts,” refusing to pay for incomplete apartments. By 2024, new residential construction, sales, and prices were still well below pre-crisis levels, though early policy easing has begun to restore some confidence.
Policy Measures and Stabilization Efforts
In response, authorities implemented a combination of fiscal, monetary, and regulatory measures. These included easing down-payment requirements, relaxing purchase restrictions, cutting interest rates, and providing financing support to ensure the completion of stalled projects. Land price ceilings were removed to incentivize developers, while idle housing and land were repurposed for affordable housing or productive use. Stricter pre-sale regulations sought to reassure buyers that completed projects would be delivered, restoring trust in the market.
The impact of these measures was noticeable in late 2024, when first-tier cities reported modest recoveries in activity and price declines began to narrow. Yet the market remains far from fully recovered, with analysts forecasting stabilization only by late 2026 or early 2027.
Sales and Demand Trends
Despite the easing measures, primary market sales have remained weak. Nationwide, 814.5 million square meters of new housing were sold in 2024—a 14.1% year-on-year decline, following sharper drops in 2021 and 2022. In the first half of 2025, new-home sales totaled 383.6 million square meters, down 4.4% year-on-year, while the total sales value fell by 5.9% to RMB 3,884.9 billion.
Buyer behavior has shifted, with off-plan home sales, once dominant, now representing 68% of new residential transactions, down from 90% in 2021. Completed new units saw a 15.5% rise in transactions during the first half of 2025, reflecting a preference for tangible, ready-to-move-in properties. Meanwhile, the secondary housing market demonstrated relative resilience, with 876,700 existing homes sold across 30 key cities—a 12.1% increase year-on-year—highlighting ongoing demand in established urban areas.
Supply Dynamics and Inventory Management
On the supply side, residential construction remains constrained. Housing starts in the first half of 2025 fell by nearly 20% year-on-year, while completions declined by 15.5%. Inventory levels, however, are at multi-year highs, reaching 408.21 million square meters by June 2025. Local governments are now actively promoting inventory absorption, utilizing funding schemes to purchase idle homes and moderate pricing pressures.
Analysts suggest that the combination of constrained supply growth, policy support, and selective inventory absorption could help gradually restore market balance, though structural issues such as affordability challenges and uneven demand across cities are likely to persist.
Looking Ahead
China’s housing market is entering a phase of cautious stabilization. Analysts anticipate modest new-home price declines of 3-10% through 2025, followed by gradual recovery as policy easing, improving affordability, and completed inventory stimulate renewed demand. Yet structural challenges—including high unsold inventory, persistent affordability gaps, and the lingering impact of past developer defaults—mean that full recovery may take several years.
For buyers, developers, and investors, the market is transitioning from crisis to adjustment, where strategic purchases, completion-backed projects, and tier-one city opportunities present safer bets. The era of unchecked speculation may be over, but the path toward sustainable growth and market confidence is finally emerging.
