Goldman Sachs and other financial agencies forecasted that China’s real estate market will hit its lowest point in 2025 and will not improve until the second half of that year, despite Chinese President Xi Jinping’s promise to his people to “halt the real estate market decline.”
Goldman has stated that, according to their analysis, property prices in China will start to stabilize in late 2025 and rise by an average of 2% two years later. This current state is likely due to the high levels of debt among developers and the practice of selling homes before completion, which has led to a decline in consumer trust.
To combat these issues, Goldman predicts that the Chinese government will spend an additional 8 trillion yuan ($1.12 trillion) in order to reduce unsold housing inventories and ensure the delivery of pre-sold but unfinished homes.
Edward Chan, director at S&P Global Ratings, also noted that the government must prioritize support for developer financing and destocking to achieve stabilization in the second half of 2025.
However, this poses a significant challenge, as China has stated that its current priority is reinforcing advanced manufacturing as a new growth driver, with support for the real estate sector, which once accounted for over a quarter of GDP, as a secondary concern.
Moreover, according to Nomura, approximately 20 million pre-sold homes remained unfinished at the end of last year, with only 4 million homes completed and delivered to buyers under this year’s whitelist program.
Nevertheless, the government’s efforts have not gone unnoticed. According to the real estate research firm China Index Academy, property sales in 22 major cities in October fell by approximately 4%, a much smaller contraction compared to the 25% drop in September.
Even as stabilization may be on the horizon, Goldman has warned that the amount of stimulus package going into the property is still insufficient and that Beijing needs better execution on the issue to stop the decline. The American investment bank also warned that property prices could continue to drop by another 20-25% if the government failed to deliver policies the market really needs.
S&P Global analysts also added that this deterioration may lead to a new persona for developers, resulting in a “lack of confidence” and a “cautious approach” toward land acquisition and initiating new projects. Based on official data from the National Bureau of Statistics, the number of new construction projects has plummeted by 42% in 2023 from their peak in 2019.
