China’s Real Estate Market: Where do things stand? What can be expected in 2025?

26 March 2025 / Report

The downturn of China’s real estate sector since 2020 has greatly impacted China’s economy, particularly household wealth and consumer confidence. The sector's stabilization is thus of great importance to aggregate demand and Chinese consumption growth in the future. Although there are some notable positive green shoots, broad-based stabilization, much less recovery, is not expected in 2025.

Key Insights

The latest annual data for 2024 show that strong downward pressure on housing prices and sales persists. New and secondhand home prices fell at an accelerated pace in 2024. Total sales of the top 100 real estate companies declined by 28.1%. While first-tier cities showed some resilience, lower-tier cities experienced steep corrections. On the supply side, there is a deep contraction, with real estate investment posting the largest year-on-year (YoY) decrease since 2004. Alongside rising inventories, local governments are struggling mightily with fiscal gaps caused by falling land sale revenues.
Government intervention designed to stabilize the sector since September 2024 has had some modest, positive impact. The key measures – such as the multi-trillion-yuan “White List” lending program, urban village upgrades, and reduced purchase restrictions for home buyers (see pp.7-8) – have slowed price declines, particularly for new homes in first- and second-tier cities. In addition, national completed floor space has risen as has floor space sold.
Despite these early signs of possible stabilization, economic uncertainty, weak consumer confidence, and surging household debt – now over 60% of GDP, more than double its 2010 level – continue to weigh on the housing market. In addition, the progress of promised government housing buybacks remains slow, with less than 4% of unsold inventory repurchased.
Looking forward, assuming more effective implementation of already-pledged policies1, new home prices may stabilize in Q2. Secondhand housing prices will recover more slowly. Modest sales growth for new homes is also projected. But newly started floor space of commercial residential buildings will continue to decline as developers prioritize completing existing projects over starting new ones. Oversupply remains a serious challenge, although inventory levels are expected to rise more slowly than they did in 2024.
Home price declines erode the real net worth of households, “on paper”, and their perceived purchasing power (i.e. a negative wealth effect). Even if prices stabilize later this year, consumer sentiment will likely recover gradually as many households prioritize debt repayment and savings. Younger buyers will opt for renting because of job insecurity and modest income growth concerns. Yet demand is expected to be reasonably strong from first-time buyers, families seeking preferred school districts, and “upgraders”. Developers will continue shifting toward higher-quality housing, and many are diversifying into construction management services, although rising competition in this emergent service sector is already pressuring margins.
Demand for large-scale investment in building new commercial residential housing remains subdued. Yet foreign multinational companies (MNCs) with interests in China’s real estate sector can tap into premium housing demand in top-tier cities and urban upgrade projects that require green building technologies, sustainable materials, and smart city solutions.
China’s push to develop the market for long-term rentals as well as public Real Estate Investment Trust (REIT) products also opens new investment pathways. Foreign businesses can invest in rental apartments and leverage pre-REIT structures, positioning themselves for higher returns as the public REIT market matures.
Success hinges on strong localization, especially in forming partnerships with local governments and reputable real estate developers. As always, foreign MNCs should seek cities and neighborhoods with the required mix of economic variables necessary for sustainable consumption growth over the long term.