After enduring a significant property crisis, China shows signs of recovery, particularly in major cities like Shanghai. A notable high-end home sale indicates renewed interest, while recent data suggests that the sales decline is slowing. However, challenges remain, especially in smaller cities, highlighting the need for sustained government support to stabilize the overall market.
China is slowly emerging from its prolonged property crisis, which has gripped the economy over the past few years. Recent developments indicate that the situation may finally be stabilizing. On May 27, a gated home in Shanghai’s upscale Changning district made headlines when it sold for a staggering 270 million yuan (approximately $38 million), prompting speculation that the property market may be on the mend. This sale serves as a intriguing sign that wealthy investors continue to engage in the property market despite previous downturns, reflecting renewed interest in high-end real estate.
The economic landscape has certainly taken a toll in recent years, with property contributing a remarkable 25% to GDP before the crash in 2020; now that figure has slipped to around 15%. This slump in the market has significantly affected consumer confidence and household wealth, with real estate losses impacting about 80% of families until 2021, a statistic now lessened to 70%. Additionally, the financial struggles of many developers have exacerbated the crisis, resulting in unpaid bills and a significant overall impact on GDP growth.
Nonetheless, the environment for the housing market appears to be shifting. Sales of new homes have shown resilience, dropping only about 3% in value in the first four months of 2025—a stark contrast to the 17% decline seen in 2024. Analysts from S&P Global suggest that transactions will continue to dip slightly for the remainder of the year, but the downward trend is not as steep as before.
A critical issue fueling the property bottleneck was the unprecedented number of unsold flats; last year, approximately 80 million homes sat vacant. However, in major urban areas like Beijing, Shanghai, and Guangzhou, this inventory is being reduced. Recent data shows developers’ inventory in these cities has decreased significantly in terms of required selling time, now approximating 12.5 months, down from nearly 20 months just a year prior.
Shanghai is emblematic of this trend. From February to April, the city experienced a steady monthly increase in transactions, defying the overall trend of declining home prices. Luxury housing appears to be particularly robust, with properties being quickly snapped up as investors return to the market. Real estate agent Ms. Fang observes that while standard property prices are rising moderately, premium homes are experiencing even more rapid price appreciation.
Several factors seem to be contributing to this shift. According to an IMF study, housing market recoveries typically take around four years. After government measures in mid-2020 aimed at containing the real estate bubble, uncertainty among investors became prevalent as major developers faced financial scrutiny. Meanwhile, local governments are stepping up efforts, acquiring excess housing and unused land. Incentives, such as subsidies for home buyers and renovation plans for run-down neighborhoods, aim to stimulate demand, while the central bank’s recent interest rate cuts seek to further invigorate sales.
However, there are still clouds on the horizon. The ongoing trade war with the U.S. continues to undermine confidence, with residential prices across 70 cities reportedly decreasing by around 2% month-on-month as of April. Additionally, new home sales and construction activity experienced declines, indicating a potentially stagnant market moving forward. According to Larry Hu from Macquarie, while the situation isn’t worsening drastically, significant government support will be critical to foster recovery.
In cities like Wenzhou, however, the downturn remains pronounced, with alarming price drops reported across various neighborhoods. A local restaurant owner shared concerns regarding official statistics, suggesting they do not accurately capture steep discounts—up to 50% on new homes in certain overbuilt areas. With smaller cities bearing the brunt of these issues, it seems any recovery could take longer to manifest in places like Wenzhou.
While larger, affluent urban centers might be on the path to recovery, smaller cities face prolonged struggle. According to S&P, new-home prices in major cities are expected to stabilize, but third-tier cities may encounter further declines. As China works to escape its property nightmare, ensuring that recovery extends beyond high-end apartments in Shanghai will be significant for a balanced and resilient economic future.
China’s property market might be moving towards recovery, with signs of activity in major cities and luxury segments. While sales declines have softened and inventory issues are being addressed, the overall situation remains fragile, particularly in smaller cities. Despite the property crisis appearing to ease in affluent urban areas, extensive support from the government will be crucial to ensure a continued upward trajectory and to stabilize the market as a whole.
Original Source: www.hindustantimes.com
