Pictured here is the construction of a real estate project in Huai'an city, Jiangsu province, China, October 9, 2025.
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BEIJING – China's property market is expected to slump more than expected in 2025, extending the industry slump for a fifth straight year and delaying hopes for a market turnaround, S&P Global Ratings said in a report late Thursday.
Analysts expect new home sales to fall 8% from a year ago to 8.8 trillion yuan to 9 trillion yuan ($1.23 trillion to $1.26 trillion).
That's a much steeper decline than the 3% decline the major ratings agency had forecast in May. At the time, analysts thought the trade war and other external uncertainties had prompted China to provide more support to the real estate sector, Edward Chan, director of corporate ratings at S&P Global Ratings, told CNBC.
The main reason for the weaker outlook is that “homebuyer sentiment is still quite fragile,” Chan said. “Therefore, the government must continue to support the sector and demand.” [to] Help restore homebuyer confidence.”
In September 2024, Beijing called for efforts to “halt” the real estate decline at a high-profile meeting. But after some new measures last year, the political momentum to expand support appeared to be weakening.
S&P noted that China's benchmark five-year lending rate – the benchmark for most mortgages – has fallen just 10 basis points so far this year, compared with a 60 basis point reduction in 2024. This signals that Beijing is not easing policy as aggressively as before despite the real estate slump.
In August, three of China's largest cities relaxed purchasing restrictions to allow buyers to own multiple properties. However, according to S&P, the measure mainly affected units in the less desirable suburban areas.
“If demand can be stabilized in the higher-tier cities first, especially in the first tier [largest] Focusing on cities first would likely help demand recovery be more sustainable,” Chan said.
A trend reversal remains hopeless
For now, hopes of a bottom in China's real estate slump appear even further away.
According to S&P, China's real estate market will have halved in just four years from 18.2 trillion yuan in 2021, as sales are forecast to be 9 trillion yuan or less this year. The rating agency expects sales to fall by a further 6 to 7 percent in 2026 and first home prices to fall by 1.5 to 2.5 percent.
In recent decades, home buyers in China have tended to purchase apartments before completion. But when developers ran into financial difficulties, construction was delayed, shaking consumer confidence. This prompted Beijing last year to announce a “whitelist” to fund approved unfinished projects.
According to S&P, the inventory of completed but unsold apartments rose to 762 million square meters in August, up from 753 million square meters in December 2024.
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“The government has done a lot to reassure people [that getting] “Their housing is not the problem now,” Chan said. “The problem is that overall demand across the country appears to be weaker than we expected.”
Going forward, he expects the government to intervene, albeit gradually, when market weakness occurs.
August saw both an easing of some restrictions on home purchases and a high-profile acknowledgment from Chinese Premier Li Qiang that the property downturn remains unresolved, indicating the need for further support.
The following month, sales at China's 100 largest developers rose 0.4% year-on-year, S&P said, citing industry data.
As developers struggle to survive, the report says: “The end result could be a smaller market, but also a healthier and more resilient sector.”