[WORLD] In recent years, China’s real estate market has faced numerous challenges, with fluctuating home prices and various government intervention measures attempting to stabilize the sector. Despite the government’s efforts to reignite the property market and recover from years of sluggish growth, the latest data reveals an unexpected downturn. Home prices in China fell once again in February 2025, signaling that the revival efforts have yet to achieve the desired impact. In this article, we will explore the current state of China’s housing market, the revival efforts, the underlying economic factors contributing to the price drop, and what this means for the future of the sector.
The Decline in Home Prices
China’s housing market, once one of the main engines of its economic growth, has been struggling for several months. According to the most recent data released in March 2025, new home prices in China dropped by 0.14% in February compared to the previous month. This marked a continuation of the price decline that began in January, which had seen a smaller drop of 0.07%. At the same time, used home prices fell by 0.34% in February, showing a similar trend.
This persistent decline in home prices comes despite a series of government measures intended to revive the sector. The Chinese government has rolled out various initiatives over the past year to support the real estate market, such as lowering mortgage rates, easing lending conditions, and providing direct subsidies to homebuyers. However, these efforts have not been enough to reverse the downward trajectory of home prices.
As noted by the chief China economist at Nomura Holdings, Lu Ting, the challenges facing the property market are far from over. He remarked, “Markets should not forget that China’s property collapse is not yet over,” emphasizing that the effects of the real estate downturn are still ongoing, and the market is showing little sign of stabilization in the short term.
Revival Efforts and Policy Measures
The Chinese government has been proactive in attempting to revive the real estate market, recognizing that a healthy housing sector is crucial for the broader economy. Among the measures implemented are adjustments to the country’s monetary and fiscal policies. These include interest rate cuts, which were intended to lower borrowing costs and stimulate property demand. Additionally, regulatory reforms have aimed to loosen restrictions on housing purchases in certain regions, allowing more people to buy homes, particularly in cities that are experiencing an oversupply of properties.
In a bid to address the ongoing housing crisis, a policy meeting held in early March 2025 introduced several new initiatives. One of the most significant changes was the decision to grant regional governments more control over unsold homes. This move is seen as a way to help clear excess inventory in the market, which has been one of the key factors behind the price declines. By allowing local governments to have more authority over housing prices and sales, authorities hope to create a more flexible and responsive housing market that can better match local demand.
Another important measure is the potential removal of price caps for local authorities in an attempt to boost the affordability of housing. These price caps, which have been in place for several years, have prevented housing developers from adjusting prices according to market conditions. The removal of these caps could help developers remain financially viable and incentivize them to build more affordable homes for potential buyers. According to the government’s statement, this policy change is designed to encourage homebuilders to focus on the middle and lower segments of the housing market, which are currently underserved.
Despite these efforts, the results have not been as successful as hoped. While there are some signs of improvement in the data, the real estate market continues to face significant challenges. As Lu Ting highlights, while home sales in some cities have picked up, the overall price trend remains negative. He points out that the market should not be overly optimistic about a swift recovery, noting that “the road to recovery is long.”
Economic Factors Contributing to the Price Decline
Several broader economic factors have contributed to the continued fall in home prices in China, despite the government’s intervention measures. One of the most significant issues is the ongoing deflationary pressures facing the Chinese economy. Deflation, or a general decline in the price levels of goods and services, has created an environment where consumer demand is weak, and businesses are reluctant to invest. This has had a direct impact on the housing market, where lower consumer confidence has led to reduced demand for homes.
Additionally, ongoing trade tensions, particularly with the United States, have created uncertainty in China’s economic outlook. These tensions have affected investor sentiment, with foreign investments in China’s real estate sector falling. In particular, the instability in the global economy has made investors hesitant to commit to long-term investments in China’s housing market, further depressing prices.
China’s real estate sector has also been struggling with a debt crisis. Over the past few years, many property developers took on significant amounts of debt to fund construction projects. As a result, a number of major developers have defaulted on their loans, leading to a lack of new housing projects and further contributing to the market’s stagnation. While the Chinese government has stepped in to support some of these developers, the overall impact on the sector has been severe.
Signs of Recovery Amid the Decline
Despite the broader challenges facing the real estate market, there are some signs that China’s housing sector may be starting to stabilize. For instance, the rate of price decline has slowed in recent months. In February 2025, the decline in new home prices was 5.22% year-on-year, which is an improvement from the 5.43% drop recorded in January. Similarly, existing home prices fell 7.53% in February, which was slightly better than the 7.8% drop in January.
While these improvements are modest, they offer some hope that the government’s measures may be starting to have a positive effect. In particular, the easing of restrictions on home purchases and the potential removal of price caps could help to stimulate demand in the market.
Furthermore, the fact that home sales are beginning to pick up in certain regions is encouraging. While the price declines have been widespread, some cities are seeing an increase in transaction volumes, particularly in areas where inventory is being reduced and more affordable homes are being offered.
The Road Ahead: Uncertainty and Caution
Despite the small signs of improvement, the future of China’s housing market remains uncertain. Experts caution that the government’s revival efforts may not be enough to completely reverse the downward trend in home prices in the near future. As Lu Ting from Nomura Holdings pointed out, the current downturn is far from over. “The collapse of China’s property market is not yet behind us,” he stated, urging caution in the face of the ongoing challenges.
For the real estate market to fully recover, several factors will need to align. The government’s policies must continue to evolve to address both the supply and demand issues within the housing sector. Additionally, broader economic stability, both domestically and internationally, will be crucial in ensuring that consumers regain confidence and demand for housing increases.
China’s housing market is in the midst of a delicate recovery. While the government’s revival efforts, including policy adjustments and financial support for developers, are helping to stabilize certain aspects of the market, the overall trend remains downward. Home prices have continued to fall despite the government's best efforts, and experts caution that the road to a full recovery is still long.
As Lu Ting of Nomura Holdings aptly put it, “Markets should not forget that China’s property collapse is not yet over.” This sentiment underscores the complexity and uncertainty that characterize the real estate sector in China today. While there is hope for gradual recovery, significant challenges remain in restoring confidence and stability to the housing market. For now, the sector is likely to remain in a state of flux as policymakers continue to seek solutions to the ongoing crisis.
In the coming months, it will be crucial to monitor the effects of the government’s new policies, as well as the broader economic conditions in China, to assess whether the real estate market can truly rebound or if further intervention will be required.
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